27th September – Following the US Presidential Elections through the medium of USDMXN

Hello traders,

Yes I know I have been less prolific over these summer months – I have, as my good friend told me, been ‘working like a one-armed bricklayer in Aleppo’. Make of that what you will.

Anyway, here’s a big picture view that maybe of interest to some. Post Brexit the next big event is the US elections (especially as the Italian referendum keeps getting put back – (read into that what you may).

What you may not realise is that the US Dollar /Mexican Peso rate is a great indication of who is likely to win the US elections. Why? Well let me explain.

Let me start by  declaring my allegiances…..I simply don’t care for either of the candidates.  Whilst a female president would be good for the US….I don’t necessarily think Hillary is the right one for that accolade. As for Trump I was genuinely intrigued to see him run as a non-political establishment figure. I was really intrigued…….right up until he opened his mouth.

I have spent a lot of time in the US and have some dear US friends. That a country of over 300 million people can offer up those two as their best options is sad and disappointing. The world still looks to the US to set the tone….and this has been a circus of the worst possible kind.

So how does it affect the USDMXN rate? Well as you’ll be aware Trump has made some rather disparaging, and frankly, racist comments about his southern neighbours. This has caused all sorts of diplomatic incidents and bad blood between the US and Mexican people. This has been reflected in the USDMXN rate. Whenever Trump says something inflammatory or his polls rise then so does the USDMXN rate as the Mexican Peso Rate gets sold off.

Interestingly we’ve also been  approaching the psychological 20.00 level. Were Trump to move ahead significantly in the polls or win the election then its fair to say that level would be broken.

Having said that we can also get a true reflection of the outcome of the election debates by looking at the charts.

This is the Daily chart of the USDMXN and you can see from todays big sell-off that the markets believe Hillary won last night’s election debate.

There is also the question of the Mexican Central Bank and their plan for Interest Rates however for ourselves watching the USDMXN rate gives us a great real-money proxy for twists and turns of the US Presidential race. One to keep an eye on.

Trade well.