NAFTA Negotiations – EUR/MXN Technical Analysis

In June 2015, when Trump announced he would be running for presidency, many people wrote him off. To them, he was just another showman seeking to promote his brand. He had tried it a couple of times before.

In his first speech at Trump Tower, he talked about many things but only the immigration issue remained in the minds of many people. On that day, he belittled Mexicans and officially started a rift that exists to this day.

When he won the presidency, many people expected the Mexican peso to collapse. In fact, many Mexicans argued that it would be better for the country to buy Twitter and block Trump. This is because the value of the peso was falling as a rock.

Last year, the opposite happened. As shown below, the dollar ended the year lower against the peso.

In recent weeks, the main talk on trade has been about NAFTA. As you possibly know, Trump campaigned on a populist agenda. He argued that trade agreements like NAFTA were the main reasons why millions of manufacturing jobs have disappeared from the country. After swearing in, his first task was to exit from the Trans Pacific Partnership (TPP).

Recently, there have been concerns that Trump will pull the country out of the NAFTA agreement. Trump argues that the Mexico takes advantage of the United States. As a proof, he shows the ballooning trade deficit between the two countries.

An end to NAFTA would be consequential to the North American trade and the countries involved. Through NAFTA, Americans have been able to buy cheaper goods from Mexico while Mexico has been able to buy American-made products.

While NAFTA has been beneficial to all countries, there are real concerns. In the U.S, a large, stratified population has felt the benefits. However, many concentrated people such as those in cities like Detroit have been hurt by these policies.

Many observers expect the U.S to remain in NAFTA. However, there are concerns that Trump is an unpredictable president who would exit the deal unless major issues are addressed.

This leaves the USD/MXN in a precarious position. A dissolution of NAFTA may lead the pair higher as the Mexican economy would be the most affected. This may cause the pair go up to the 20 level.

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