- The US dollar has been very choppy against the Mexican peso during the month of November, and it is a simple continuation of what we had seen during the month of October.
- I had suggested during the month of November we would see a lot of support near the 18.20 level, and that's exactly what's happened.
- This does make a certain amount of sense, considering that the market has found itself somewhat stagnant. We have a lot of questions to ask about the pair due to the trade situation around the world.
While the US economy slows down, that doesn't actually help the Mexican peso in this situation, because the United States is the number one destination for Mexican exports. The Mexican economy is tied almost solely to the United States. The better the United States does, the better the Mexican peso does, as not only does the interest rate differential favor the Mexican peso, but that means Mexico's biggest customer is healthy and can buy plenty of Mexican goods.
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Major Technical Levels and Economic Sensitivities
When you look at the technical analysis, it's hard not to notice that the 18.20 level happens to be roughly the 61.8% Fibonacci retracement level from the bounce back in the middle of 2024. And now we have a lot of questions to ask as to which direction we go. I think with all of the uncertainty out there, the month of December is going to be a carbon copy of the month of November, at least unless we get some type of external factor, like an economic crash or a big, huge “risk on” type of situation. It's worth noting that retail sales in the United States are dropping, and that is negative for the peso.
If the US dollar were to rise above the 18.75 level, I think you could see a change in the trend. If the US dollar were to break down below the 18.20 level, the 18 level would be targeted. And then underneath there, we probably have a bit of an air pocket down to the 17.50 level, which was a major supply level. I suspect December will be neutral, but those are the levels to watch.
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