The given asset is quite popular in the foreign exchange market. Its convenience, predictability, and high volatility enables many traders to derive substantial profits.
Despite economic crises that impacted this country in 1994 and 2008, this country has managed to recover, and now it demonstrates a positive growth. What's more, the South American downtime of 2002 didn't affect the country's indicators. Unlike other nations in the region, the Mexican economy kept soaring.
Many significant factors make the country's peso go up. Anybody willing to trade USD/MXN should be aware of these factors. The Mexican economy is tied to crude prices since it's one of the vital oil exporters in the region. When crude prices hit a historical maximum in 2008, the country's economy showed a rapid surge.
The oil export amounts to nearly 10% of Mexico's income. So, steep moves in crude prices instantly impact the national currency. The cabinet levies a significant tax on Pemex, the country's critical oil company. The given tax brings up to 30% of the country's budget. In terms of dependence on oil prices, the Mexican peso has much in common with the Russian ruble.
The country has close economic ties with America. It dramatically boosts the liquidity of the Mexican asset. The currency pair USD/MXN acts as a gauge of financial interaction between the neighboring countries. For instance, in 2014, America exported services and products to Mexico valued at $240b. The reverse trade flow accounted for up to $294b. The given proportion in the trade balance between the two countries positively affects the Mexican peso.
For the last 20 years, the Mexican peso has been in a losing position relative to the evergreen buck. It's because the Mexican economy is much dependent on the United States.
The dive in oil prices profoundly affected Mexico's currency. The situation is also worsening due to a slump in the volume of extracted crude. So, the Mexican economy faces double damage. It even provoked a substantial devaluation of the national currency. Investments in Mexico headed south that greatly impacted MXN's liquidity.
The currency pair USD/MXN boasts extreme volatility rarely seen in other currency pairs. The Mexican peso is capable of demonstrating a daily change in its value at the level of up to 200-300 points. The most active trade in this currency pair occurs from 11:00 to 18:00 GMT. It's due to the direct connection between the national currency and crude.
To trade this pair, you should use various tools. Carefully monitor all the news. Particular attention should be given to commodity markets. Moreover, we also advise focusing on changes in macroeconomic indicators in the United States and Mexico. The unemployment rate, as well as the GDP of Mexico and America, significantly affect the quotes of this pair.
Use various timeframes to conduct your technical analysis on this pair. You require determining the medium-term, short-term as well as long-term trend. Money management is especially crucial for this highly volatile pair. Use leverage cautiously. Any steep ascends in the value can rapidly eat up your trading deposit.