FxWirePro: Our short call in Mexican peso under threat

In January, we at FxWirePro recommended going short in the Mexican peso to our readers against the US dollar at the then current rate of 21.94 per US dollar with a target around 27.2 per dollar and the stop loss around 18.5 per dollar. We suspected that as the USW President Donald Trump has taken up a hard stance towards North American Free Trade Agreement (NAFTA) and has vowed to Make Mexico pay for a southern border wall to be built under the Trump administration. In addition to that, since his election, President Trump has taken a jab towards many American companies planning to shift production to Mexico. We suspected a long way down for the peso.

However, in reality, the Mexican peso has gained lots of grounds since our article. It is currently trading at 19.5 per dollar largely because the central Bank of Mexico has taken up steps to prevent the depreciation of the peso. From today onwards it is starting off its $20 billion hedging programs. In addition to that, Donald Trump’s secretary of commerce has talked of supporting the dollar/peso exchange rate in favor of stability.

While there have been some calls in the past, where we sensed a change in direction or fundamental and have recommended either opposite positions or a closure of the trade. However, in this case, we would like to see through our stop loss and possibly another 500 pips.