11-28-2018: March Mexican Peso: Immigrant Border Problem Definitely Hinders Exchange Rate

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Point & Figure

Internal Progrm
Third System

Historic Range

Random Chart
Calendar Spread

Level Table
Other Factors

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The Mexican Peso is a bit hokey to trade with options or other types of spreads, and the confusing decimal point placement in the exchange format can wreak havoc with some trading systems. Nonetheless, the story on the Peso seems now to revolve completely around the uncertainty caused by the American President's handling of what he calls a "border crisis." If there wasn't one there before, there is one now, and the uncertainty as to how that will affect trade relations seems to govern most analysts' view of the future. Other factors are at work to pressure the Peso as well, especially as relates to interest rates which are going up in the U.S. but remaining somewhat more subdued in emerging markets, attracting investor sentiment toward a higher exchange rate for the U.S. Dollar. The "crisis" caused by the President may affect economics in this country even more than it affects security and immigration issues, because goods from Mexico are substantial and help keep prices lower in the U.S. Rich Republicans don't give a damn about that, they have plenty of money they robbed from the working class by their incredible tax breaks for the rich only. Rather they fear the masses lining up near the border.

Intermarket Analysis

We fed Mexican Peso, Canadian Dollar and Australian Dollar into a neural network to get the following result:

Parabolic Chart

March Mexican Peso:

Parabolic Chart

Nirvana Chart

March Mexican Peso:

Initial Chart

News Analysis

The Mexican Peso has fallen to its lowest level against the U.S. Dollar in nearly a year-and-a-half after President Trump threatened to shut down the southwestern U.S. border. After having U.S. full military troops throwing up razor wire and barbed wire coils along the border said he wants Mexicoi to return migrants to home countries, and threatened to close the border permanently if this is not done. U.S. agents shot tear gas at people trying to breach the border, something illegal under international law in warfare, but not illegal to use on civilians. "Mexico should move the flag waving criminals back to their countries," said Trump on Twitter. "Do it by plane, do it by bus, do it any way you want, but they are NOT coming the USA. We will close the border permanently if need be. Congress, fund the wall!"

Mexico is the third-largest U.S. trading partner with $557.6 billion in two-way trade during 2017, according to the Office of U.S. Trade. Trade in services accounted for another $58 billion. So far, the Peso has fallen to a low of 20.4624 to the U.S. Dollar. The San Ysidro port of entry between Tijuana and San Diego is one of the busiest border crossings in the world, and was temporarily closed after agents shot rounds of tear gas at migrants, leaving children screaming and coughing according to the Associated Press. Agents arrested many migrants after they managed to get across the border by storming it in masses. Gerardo Garcia, head of the immigration department at Mexicoi's interior ministry said 98 Central American migrants were arrested there and are being deported. Newly elected President Andres Manuel Lopez Obrador said his administration will meet in Mexico City after December 1st to discuss the border situation and Trump's remarks.

The U.S. Dollar held its ground even after the Euro advanced on reports that Italy may cut its budget deficit toi satisfy the European Union. Both the Peso and the Brazilian Real are sliding against the U.S. Dollar by expectations of higher U.S. interest rates.

Leftest Leader Obrador who takes office on December 1st had campaign promises that included transferring cash to the young and elderly, and building a railway line in Southern Mexico. Markets are nervous about those promises. Credit Suisse analysts expect a voter turnout in Mexicoi of around 600,000 and a majority of voiters toi approve all ten of sweeping proposals of the new president there.

Mexican traders have actually debated buying Twitter to silence Donald Trump. "Trump anxiety" has weakened most emerging market currencies.

All talks concerning the future shape of NAFTA, ahead of more talks between the U.S. and Canada, continue to ramp up pressure on emerging market currencies. Outside markets are affecting the Peso including news that South Africa fell into recession in the second quarter, and fears that Argentina's austerity plans will not be enough to stem its economic crisis. Some regard the Peso's fall as a generalized trend in emerging markets. Until very recently, Mexico swore that it wanted any new NAFTA agreement toi remain tripartite, but struck a deal with the U.S. that Trump now wants Canada to sign onto, despite serious differences remaining between Canada and the U.S. Trump said if Canada fails to sign on, he will seek a go-ahead withi just Mexico. Business groups said that would put the Peso under further pressure. Even a bilateral agreement would give investors some certainty, unlike what exists now. Due to the result of Mexican presidential elections, there is still a lot of potential volaility left for the Peso, and all of that has not been factored in to a possible further Peso slide.

"Trading Economics" predicts the Peso will rise to 18.99 to the U.S. Dollar by the end of the year. It bases this optimistic forecast on factors such as GDP growth rate in Mexico, unemployment rate there, inflation rate, interest rate, balance of trade, and goivernment debt to GDP.

Our assessment of the news is that the primary factor causing the Peso to jump all over the place is any good or bad news on U.S. - Mexico trade relations, and the current pressure the U.S. is placing in Mexico to handle the immigration situation could jiggle that factor either way. But because of the border pressure from migrants, the "jiggle" is becoming more than a hiccup and may encourage the U.S. to use trade pressures to get its way regarding Mexican handling of immigrants. There is some question about how Mexico's new more liberal government will regard this, and markets abhor uncertainty.

Point & Figure Chart

580.0|                                                                  T 11/26
     | CME - Mar-19 Mexican Peso 500K P, c/100 P   Cm.=0.01  Lim.= 0.6
     |OXO  X
     |O OXOXOX
     |  OXOXOXO
     |  OXO OXOX
     |  OX  O OXO
     |  O     O O
     |          O
     |          O
     |          O                                  X
     |          O  X                           X   XOXOX XO
     |          OX XO                          XO  XOXOXOXO
     |          OXOXO                          XO  XOXOXOXO
     |          OXOXO                        X XO  XOXOXOXO
     |          OXOXO  XOXO                  XOXOX XOX  O OX
     |          O O O  XOXO                  XO OXOXOX    OXO
     |              O  XOXO                  X  OXOXOX    OXO
     |              O  XO O                  X  OXOXOX    OXO
     |              O  X  OX     XO  XO    XOX    OXOX      O
     |              OX X  OXOX X XO  XO    XOX    OXOX
     |              OXOX  OXOXOXOXOX XO    XO     O OX
     |              OXOX  OXOXOXOXOXOXO    X        OX
     |                OX  O OX    OXOXO    X
     |                OX    OX    OXO O    X
     |                OX    O     OX  O    X
     |                O           OX  O    X
     |                                O O  X
     |                                O OX X
     |                                O OXOX
     |                                O OXOX
     |                                  OXOX
     |                                  O OX
     |                                    OX
     |                                    O
                    1              1111111       11       111
The above chart is giving a conventional sell signal.

Cyclical and Seasonal Factors

We are headed toward a cyclical low and a seasonal down period.

Cyclicals Cyclicals Seasonals

Internal Program

Our best-performing internal program is "Pattern." It is giving a sell signal, but it could be retroactively changed to "buy" depending upon the following day's results, which is the reason for the red warning coloration, of which there are many in the past.

Internal Printout 1 Internal Printout 2

Results of "Pattern" for Mexican Peso (blue lines = successful trades, red, unsuccessful): (Always in the market.)


Third System Confirmation

Our third system has triggered a buy signal. (Note, disregard the year on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)

Third System


The point value is $50 when prices are represented at 10,000X exchange normal decimal setting. Initial margin on a single contract is $1,320. Use of options is not advised.

Historic Range

Although it has less meaning here as there is no "cost of production," scale trade buyers are entering the market for the long term in this price range.

Historical Chart

Commitment of Traders

Commitment 1

In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Blue is small speculators. Red is large speculators. Green is commercials. Commercials with the best track record are getting increasingly-long.

Commitment 2

Volatility / Probable Range

FB 1 FB 2

The average volatility shown below suggests that an uptrend remains intact from the last volatility low point.

Range/Volatilitiy Chart

Possible Future Prices

Random Chart

Option Recommendation

We don't understand why our system is making what looks like a suspicious recommendation and don't recommend trading Mexican Peso options, but here is what it is saying anyway... Our option trade recommendation is to Sell (1) Mexican Peso March Future @ .0476 and Sell (48) Mexican Peso March .0445 Puts @ .000596
Exchange supplied data looks very stale and bad, call broker for updated bid/asks if any.

o 1 o 2 o 5

o 3

o 4

Calendar Spread

What the Jan. - Jul. calendar spread suggests to us is that buying the near contract and selling the far one is at most times profitable, which we think is a sign that these futures may go flat in the long run. The best time to enter or leave the above spread is when it is at 10.50 or narrower selling the far as prices are falling and then buying the near, and exiting or entering when it is at 15.00 or wider buying the far as prices are rising and then selling the near. At this time, we appear to be at the buy the far, sell the near point.

Level Table:

Level Table

The path of least resistance is down.
535.0|                                                                  T 11/26
 CME - Mar-19 Mexican Peso 500K P, c/100 P   Cm.=0.01  Lim.= 0.6
     |BCCCNOPPPP   <<<
445.0|-A-B-C-D-E-F-G-H-J-K-L-M-N-O-P-Q-R-S-T-U-V-W-X-Y-Z----|----|-- TPO=-0.175
       1 1 1                                       1 1 1 1           1
       1 2 2 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 8 9 9 0 0 1 1           1
       2 1 2 1 2 0 2 0 2 0 2 0 2 0 1 0 1 0 1 2 1 2 1 2 0 2           2
       8 1 6 0 5 8 3 9 3 9 3 7 1 5 9 3 8 1 5 9 3 7 1 5 8 3           6

Other Factors

Multiple Chart Indicators Summary
Multiple Chart Indicators Summary

Here's an intraday chart for a previous day ( 11/26 ).

Intraday Chart

                 Risk Versus Opportunity Report

                  PXH9    March Mexican Peso

                      High Price:  .04903
                   Current Price:  .04760
                       Low Price:  .04468

                            Risk: -0.061
                     Opportunity: -0.125

                    (O/R) Ratio =  2.042

Overall Recommendation

Decision Weighting Factors
FactorsWeighted Points
Inter-Market Analysis - 1
Parabolic Chart - 1
Nirvana Chart - 1
News - 1
Point & Figure - 1
Cyclicals - 1
Seasonals - 1
Internal System 1 - 1
Internal System 2 0
Third System + 1
Historic Range + 1
Commitment of Traders + 1
Range/Volatility + 1
Level Table - 1
Other Factors - 1
Total - 6
Place 11 March Mexican Peso on a Sell Watch with stoploss @ +8.92 above the get-in point when recent price is represented as "476.00".