The last half of the 2017 showed that the MXN cannot resist the strong dollar, despite the rising oil prices and a relative improvement of the economic situation in Mexico. At the same time, the Mexican government didn't impact the MXN value. As a result, in December the inflation rate increased to 6.77% which is the highest level for the last 17 years. This has been achieved mainly due to the weakening of the Mexican peso. Thus, in the middle of the last year we confirmed the formation of an uptrend.
At the same time, while the US dollar becomes more vulnerable the MXN finds an opportunity for strengthening, which was confirmed this month. Amid a weak dollar, the MXN has managed to increase in value based on the latest data about the economy of Mexico. The trade balance in November was unexpectedly positive at 399 million dollars. A month earlier, the trade deficit amounted to USD 2.066 billion. In addition, exports grew at a faster pace than imports, which in the long term creates the possibility of achieving a sustainable surplus in the future. The manufacturing confidence index in December was 49.6, which is the highest level for the last two years.
This week, the market expects data about indices in the United States. As we come closer to March, investors will be more and more sharp to react to all the economic indicators in the United States, estimating the probability of a FED rate hike in March 2018. Positive economic data increases the probability of a rate increase. Despite the latest disappointing data on the employment market in the US, the market is optimistic at the moment. Political risk factors haven't impacted the situation for a while and don't add any negative pressure on the dollar, so you can expect a certain strengthening of the dollar in the near future.
On the chart for the MXN/USD pair we can see the uptrend. After a long price correction, the trend may be resumed with new intensity. The rates at the moment consolidated in the range of 19.211 - 19.3995 USD. These levels can be good entry points to the market, a break of which would mean a resumption of the trend or at least a new price correction. At the moment the most effective would be the deals to BUY in the short-term trades.
