MXN 1Q Forecast: Mexican Peso Outlook – USD/MXN Bearish in 2021 as Restoration Persists
The Mexican Peso seems to be positioned for a chronic advance towards the US Dollar in 2021. This might current bearish USD/MXN buying and selling alternatives with the Mexican Peso possessing potential to increase its latest bout of power. Constructive outlook for the Mexican Peso piggybacks on rising crude oil prices and normalizing measures of volatility, which correspond with the worldwide financial restoration since COVID-19 first roiled markets. Furthermore, this bearish USD/MXN theme largely follows encouraging vaccine developments along with possible implications of a Biden presidency.
USD/MXN with Crude Oil & VIX Index: Weekly Time Body (JUN 2018 TO DEC 2020)
Chart ready by Wealthy Dvorak, created with TradingView
The Mexican Peso outlook is intently tied to the route of crude oil costs seeing that Mexico’s price range has a hefty dependence on income from oil exports. With the Mexican Peso typically shifting in tandem with crude oil, there may very well be potential for USD/MXN to fall additional if the value of crude climbs larger. Additionally noteworthy is the constructive relationship usually maintained by USD/MXN worth motion and the S&P 500-derived VIX Index.
The VIX ‘fear-gauge’ tends to rise throughout episodes of threat aversion, which presents headwinds to excessive beta rising market currencies such because the Mexican Peso. Alternatively, spot USD/MXN usually drops alongside the VIX Index as dealer sentiment and threat urge for food enhance. Correspondingly, the Mexican Peso would possibly proceed to strengthen as sustained market optimism causes the VIX to bleed towards pre-pandemic lows.
USD/MXN Worth Chart: Weekly Time Body (MAR 2018 TO DEC 2020)
Chart ready by Wealthy Dvorak, created with IG.
Moreover, with Mexico inflation working red-hot, Banxico might disappoint dovish expectations and gasoline extra Mexican Peso power. To that finish, spot USD/MXN worth motion would possibly stay broadly below strain over the weeks and months head. This brings to focus potential for USD/MXN to proceed gravitating decrease alongside its backside Bollinger Band towards potential technical help underpinned by the 18.500-price stage. If a Bollinger Band squeeze materializes, nevertheless, the Greenback-Peso would possibly recoil larger. However, the downward-sloping 20-week easy shifting common highlights the standing bearish pattern and potential space of technical resistance.
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