Banxico — Trading Ideas on TradingView

USD/MXN: Super Peso Defies Dollar Strength Here is the revised article with all hyperlinks removed, maintaining the professional formatting and analysis. The Mexican peso continues to frustrate dollar bulls, maintaining a defiant stability despite broad greenback strength. Over the last five sessions, the USD/MXN pair moved just 0.4%. This neutrality highlights the peso's formidable resistance. While the U.S. dollar gains ground globally, Mexico’s currency holds the line. Investors call this the "Super Peso" phenomenon. It stems from a unique confluence of high yields and structural economic shifts. Macroeconomics: The Rate Differential Shield Mexico’s high interest rates act as a primary defensive wall. The Bank of Mexico (Banxico) set its benchmark rate at 7.25% in November. Conversely, the U.S. Federal Reserve maintains a target of 4.00%. This 3.25% spread creates a massive incentive for carry traders. Investors borrow cheap dollars to buy yielding pesos. This constant demand buoys the currency even when market sentiment sours. Economics: Inflation and Policy Inflation in Mexico is cooling, validating Banxico's strategy. October data showed headline inflation dropping to 3.57%. This progress allows policymakers to consider gradual easing. However, aggressive cuts pose a risk. Narrowing the yield spread too quickly could erode the peso's appeal. Banxico must balance growth needs against currency stability. Geostrategy & Geopolitics: The Nearshoring Fortress Global trade tensions have inadvertently strengthened Mexico's hand. The U.S.-China decoupling forces corporations to shorten supply chains. Mexico is the logical beneficiary of this "nearshoring" wave. Its geographic proximity to the U.S. market is a supreme strategic asset. This geopolitical realignment drives Foreign Direct Investment (FDI) to record levels. Long-term capital inflows provide a structural floor for the peso, independent of daily speculative flows. Industry Trends: Manufacturing Renaissance Industrial parks across Northern Mexico are operating at near capacity. Global manufacturers are relocating essential production lines from Asia to states like Nuevo León. This shifts Mexico’s economy higher up the value chain. We see a transition from simple assembly to complex manufacturing. This industrial depth creates sustained demand for pesos to pay local operational costs. Technology & Cyber: Digital Finance Evolution Mexico’s financial sector is undergoing a rapid technological maturation. Fintech adoption is surging, facilitating record remittance flows. Digital platforms now process billions of dollars efficiently and securely. Cybersecurity investment is rising in tandem to protect this digital infrastructure. Robust cyber-defenses build institutional trust, encouraging further capital repatriation. Science & High-Tech: The Innovation Hub The narrative of cheap labor is evolving into one of skilled innovation. Hubs like Guadalajara are attracting high-tech R&D centers. This "Silicon Valley of Mexico" fosters a new class of engineering talent. Science-based industries, including medical devices and aerospace, are expanding. This diversification reduces reliance on oil exports and strengthens the currency's fundamental value. Patent Analysis: Intellectual Property Growth Patent filings reflect this high-tech shift. International companies are increasingly filing IP protections within Mexico. Patent data indicates growth in automotive and aerospace engineering sectors. This signals a long-term commitment to the market. Companies do not protect IP in transient manufacturing bases. They do so in strategic, long-term hubs. This entrenchment further stabilizes the economic outlook. Management & Leadership: Central Bank Discipline Banxico’s leadership has demonstrated exceptional discipline. They moved earlier and more aggressively against inflation than many G7 peers. This assertiveness established deep credibility with global markets. Investors trust the central bank to defend the currency’s purchasing power. Prudent management serves as an intangible but vital asset for the peso. Outlook: The Dollar Threat Risks remain despite these strengths. The U.S. Dollar Index (DXY) is rebounding toward the 100 level. A sustained breakout could pressure emerging market currencies. If the DXY reclaims early-2025 highs of 110, the peso will face a severe test. Traders should watch the 18.59 resistance level closely. A break above this could signal a shift in momentum.

USD/MXN: Trump fears meet Banxico decision The USD/MXN should be an interesting pair to watch in the coming days. October’s headline inflation in Mexico ticked up after two months of declines, yet analysts expect Banxico to proceed with a 25-basis-point rate cut this week regardless. Last week’s volatile trading saw USD/MXN reach 20.80, as markets reacted to concerns over a second Trump presidency. His protectionist and immigration policies would place pressure on the peso. However, for now, the pair’s uptrend may face hurdles. USD/MXN climbed to an intraday high of 20.57, but bullish momentum failed to break the year-to-date peak of 20.80, signaling possible resistance ahead.

Fed keeps rates steady, Banxico up next The US Federal Reserve has kept interest rates steady at 5.25%-5.50% while continuing its balance sheet reduction as planned since May 2023. In contrast, the Bank of Mexico (Banxico) might announce a rate cut tomorrow. It's anticipated that Banxico could decrease its interest rate from 11.25% to 11%, potentially applying pressure on the Mexican peso. This could drive the USD/MXN rate closer to the 17.00 mark, diverging further from its 10-year low. Some Fib levels from its recent swing higher could also be some interesting, more assessable, targets However, the possibility of a rate cut from Banxico is not guaranteed, given potential divisions within its Governing Council. Recent speeches by officials indicate a 3-2 split, with some members leaning towards a more accommodative approach, while others like Jonathan Heath and Irene Espinosa Cantellano favor a hawkish stance.

USD/MXN at support ahead of Banxico USD/MXN has been moving lower since April 2020 in a descending triangle. On a weekly timeframe, the pair found a zone of support between 19.5491 and 20.0338. USD/MXN bounced a number of times and tested the top downward sloping trendline of the channel, failing each time. As USD/MXN nears the apex of the triangle, is it ready to break lower? On May 30th, the pair pierced the low and made it to 19.4116 but bounced right back into the range. This week, the pair traded as low as 19.4310. If USD/MXN breaks 19.4116, there is a confluence of support at the bottom trendline of the pair’s recent channel and the lows from February 2020 near 18.5235. Resistance sits above at 19.7530 and 20.0000. Expectations are that the Bank of Mexico (Banxico) is expected to hike rates by 75bps to bring the rate to 10%. If Banxico hikes by more than 75bps and is hawkish, watch for USD/MXN to break lower!

USDMXN updates after Jackson The positional struggle, or put simple the slow siege from sellers back to the base is finally exhausting. Powell has attacked with a move several times the strength of the surrounding defence. USD will now maintain the pressure and birth of fresh strength will unlock the next leg higher in USDMXN. Since 2018 we have been tracking the explosion higher. The break of the ABCDE triangle with Covid has already been analysed several times, much rather talk about the significance of the next move. Well, it renders the precedent and totally immobility of MXN, Powell confirming the USD offer is starting to expire means breaking strong support is no longer possible. On the technicals we must be clear, the 18 handle contains not a little resentment but rather the ambitious dreams of forcing another move similar to what we saw in 2020, allowing our opponent into a false sense of security with a trap before capitulating as far as the eyes can see. The resistance to the topside is now mostly dead and buried. For those looking to buy, the goal above comes in to play at 22.3x and 22.9x as a ideal extension.

ORBEX: Trump LOST Round 1 of Impeachment Battle!Trump was impeached yesterday and lost! But the trial timing remains in doubt, keeping parties on their toes! Meanwhile, BoJ kept interest rates unchanged overnight and now we have to wait and see if BoE adds to the downside risks on #no-deal fears, or encourage bulls with a rather hawkish stance? I talk about all that in today’s market insights while analysing watch-listed FX Minors that move (hint: Loonie)! Timestamps GBPAUD 4H 02:30 CADJPY 4H 03:45 USDMXN 4H 05:40 Stavros Tousios Head of Investment Research Orbex This analysis is provided as general market commentary and does not constitute investment advice

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