FxWirePro: Peso reaches strongest level since US election; stop loss revised

The weakness in the US dollar, coupled with favorable comments from the US commerce secretary Wilbur Ross towards a trade deal with Mexico and a $20 billion hedging program from the Bank of Mexico has pushed the peso to its strongest level since the US election. The election of Donald Trump pushed peso to its lowest level of 22 per dollar by mid-January but since Mr. Trump’s inauguration, the peso has strengthened by almost 13 percent. Along with the above fundamentals, another one is at work here; the United States’ geopolitical rivals would try (if not already) to make the most of this souring of relations between the two neighbors. This should act as another support for the peso. The currency has also been benefiting from repatriation in the fear that it might later be taxed to finance the border wall proposed by Donald Trump.

On Trump’s inauguration day, we forecasted the peso to weaken to as low as 27.2 per dollar. The call, which was given out at the then current rate of 21.94 per dollar, is currently deep in the red. The above fundamentals continue to pose a threat to our call, however, we have already shared with our readers that for this call, we would like to see through our stop loss around 18.5 per dollar and possibly more. Hence, we are revising our stop loss to 17.4 per dollar and we would like to recommend buying at dips around 19, 18.7, and 18 to lower the break even. We are confident that even in the adverse case; due to averaging we would not be suffering big losses. We would be closely monitoring the pair.