Notwithstanding economic downtimes that affected this country in 2008 and 1994, Mexico has revived. What’s more, it’s currently demonstrating steady economic growth. Additionally, the South American meltdown of 2002 didn’t impact the country’s key indicators. In contrast with other economies in the region, the Mexican economy proceeded with its surge.
Several key factors make the country’s peso rally. Anyone who wants to trade USD/MXN needs to keep these factors in mind. The Mexican economy is highly reliant on oil prices because it’s one of the leading crude exporters in the region. When oil prices reached a historic peak in 2008, Mexico’s economy demonstrated a rapid surge.
The crude export accounts for almost 10% of Mexico’s income. Accordingly, steep moves in oil prices instantly influence the Mexican peso. The government levies a significant tax on Pemex, Mexico’s number one oil company. This tax is responsible for bringing up to 30% of the country’s budget. The Mexican peso is often compared with the Russian ruble in terms of their dependence on oil prices.
Mexico is a key trade partner of America. This fact significantly spurs the liquidity of the Mexican currency. We may consider the currency pair USD/MXN to be an indicator of economic cooperation between the neighbors.
In 2014, the United States exported products and services to Mexico, valued at $240b. As a result, the reverse trade flow amounted to $294b. The given proportion in the trade balance between the two nations has a positive effect on the Mexican currency.
For the last twenty years, Mexico’s primary currency has been in a losing position relative to the US dollar because the Mexican economy much depends on the USA.
The tumble in crude prices greatly impacted Mexico’s peso. The situation is also worsening because of a dive in the volume of extracted oil. As a result, the Mexican economy experiences double damage. Moreover, it even caused a significant devaluation of the peso. Investments in this country slumped that profoundly affected MXN’s liquidity.
USD/MXN demonstrates incredible volatility rarely observed in other currency pairs – up to 300 points a day. The asset shows its most significant activity from 11:00 to 18:00 GMT. It’s because of the direct connection between the Mexican peso and oil.
To effectively trade this currency pair, you require utilizing a variety of tools. Keep an eye open on all the news. Pay special attention to commodity markets. Furthermore, we also recommend focusing on fluctuations in macroeconomic indicators in Mexico and America. The unemployment rate, GDP of the two countries significantly impact the currency pair.
Utilize various timeframes to carry out your technical analysis on this asset. You should determine the short-term, long-term, and medium trend. Of course, trading such a volatile pair is impossible without proper money management. Cautiously approach the use of leverage if you don’t want to lose the bulk of your trading deposit.