As the pending impeachment of President Trump in the House of Representatives appears to be coming sooner than later, many are left wondering if the United States-Mexico-Canada Agreement (USMCA) will be ratified. House Democrats have not yet brought it to the floor for a vote, though Mexico and Canada have both already agreed to it. There are concerns about enforcement of the agreement. However, with the strength of the Mexican Peso vs the US Dollar over the last few weeks, it appears the market believes it will be approved.
USD/MXN has been trading in a symmetrical triangle since April of 2018. On Friday the pair closed below the rising tending for the first time and yesterday bounced to retest it. Today the pair is consolidating just below the trendline. The trendline and current price (19.1240) are just below the 127.2% Fibonacci extension from the low on September 18th to the high on October 2nd . First resistance comes in between 19.14 and 19.18.
Source: Tradingview, City Index
On a 240-minute chart, one can see that horizontal resistance comes across at the September 2nd lows and the 50% Fibonacci retracement level of the move from the high on October 10th to yesterday’s lows at 19.3200/19.3300. First support comes in at yesterday’s lows just above 19.000 at 19.0222. Below there is a band of support from a series of prior lows back in June and July down to 18.8500.
Source: Tradingview, City Index
The question now becomes one of “buy the rumor, sell the fact?” if the USMCA does get ratified. Bears need to ask themselves how much of this has already been priced into the market. If USD/MXN breaks below 18.8500, the pair can move quickly to the downside.
Watch for headlines over the next few days regarding USMCA, as Brexit and the US-China trade war continue to dominate the focus of the market. (Oh…. and there is also BOC, FOMC, BOJ, and NFP headlines to pay attention to as well!!)
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.