Asia continued the Mexican Peso sell-off today sending USD/MXN as high at 19.35000 from an open of 19.1800 before profit taking saw it drift back to 19.3200. This follows on from yesterday’s Peso train-wreck where it fell from 18.7700 to 19.2600 against the USD as it caught a severe case of “Trumpitis.”
As the highest beta currency to a Trump victory, I guess it should be no surprise after polls released, showed Mr. Trump either closing on or marginally leading Secretary Clinton. The market seems to have suddenly awoken to ramifications of a Trump victory and indulged in a risk-off sell down of all things North American overnight. Of which the Peso, much to Mr. Trump’s chagrin, is part of that.
In a year where we have seen concerted protest votes around the world against broken social contracts with middle classes, and push backs against political status quo’s, it is surprising it has taken so long to happen frankly.
Consider the different reactions in the polls to each candidate’s alleged misdemeanors. Trump’s comments re women, minorities, religions, etc. (and the list is long), are well documented. The reaction has been for Mr. Trump to slip gently further behind in the polls, with the associated moral outrage by the great and good in the media, and the assumptions in the markets that Mrs. Clinton just has to show up on the day.
Contrast this with the reaction to the news of further investigations related to Mrs. Clinton’s now infamous private email server. Her commanding lead seems to have evaporated overnight. I have no idea about these new allegations, however, the phrase “there’s never just one cockroach.” immediately came to mind. This seems to have been the reaction of many voters in the U.S.A as well.
You see, for all of the apparent flaws that Mr Trump has or has not displayed, those who were going to or were thinking of voting for him, they know exactly what they are buying. He is a vote against the perceived, entrenched political elite, and a system that has seen middle America’s standard of living go backward for no hope of change in sight. They are a. more likely to get out and vote b. will overlook obvious flaws if he can enact the change they crave. Mrs Clinton has not be accorded the same latitude for obvious reasons.
Hence we have seen a rapid polling change and an equally rapid repricing by a complacent market, of the risks associated with this U.S. Election. It parallels to the run-up to Brexit are uncanny.
Back to the Peso. Paying for Mr Trumps’ fences, the possible forced repatriation of millions of illegal immigrants, and most chillingly, the scrapping of NAFTA, all make the MXN the highest correlated currency to a Trump victory. Throw in weak oil prices again, and the story is complete.
Looking at the daily chart, support is far away now at 18.8000, a double bottom and the 100-day moving average.
Resistance is just above at 13.3800 double top on the daily chart. Beyond that is the highs at 19.9200.
Summary
The Mexican Peso will realistically not respect technicals much at the moment. It will move aggressively on political and polling headlines. With the world suddenly coming to the realisation they need to re-price U.S. risk, the Peso will remain under pressure until or unless the polls tell us different.
