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Hasta La Vista, Mexican Peso

Published 11/29/2014, 11:43 PM
Updated 07/09/2023, 06:31 AM

Before I even begin, allow me to define terms. Being bullish on the USD/MXN (spot) is the exact same thing as being bearish on the Mexican peso (which is actually expressed as MXN/USD in futures trading). USD/MXN expresses the number of pesos per USD. MXN/USD is the value of the peso in dollar terms.

As I write this, the USD/MXN is trading at 13.750X, or 13.75 pesos per one USD. The MXN/USD trades at a reciprocal of USD/MXN. Thus, 100 divided by 13.750 equals $.07273, meaning that a peso is worth just over 7 cents.

When I stared trading currencies at the IMM in the 1970s the peso was worth about $.8006. Thus, in just shy of 40 years the peso has declined in value against theUSD by 90%. The chart below reflects MXN/USD.

Mexican Peso Monthly

I believe the peso is due for another decline against the USD. The weekly graph of MXN/USD displays a possible 56-month symmetrical triangle.

MXN/USD Weekly

My weekly graph of the USD/MXN goes back further, so the symmetrical triangle can be seen in better perspective.

USD/MXN since 1994

Remember, a bear move in the peso (MXN/USD) is the equivalent of a bull move in dollar/peso.

I have commented frequently on the potential for a much stronger USD/MXN (same thing as a weak peso) in recent months. My thought was that the peso will have another decisive leg down (this means bullish on USD/MXN) in 2015. Well, 2015 may be upon us. The lower boundary of the massive triangle is being challenged.

MXN/USD Lower Boundary Challenged

The daily chart shows the position of the price and the boundary line. Note the small 6-week descending triangle. MXN/USD Daily

I am monitoring this market for a shorting opportunity. My target for the peso is toward $.0510

Disclosure: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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