07-19-2014: September Mexican Peso: Nothing But Rhetoric from U.S. Threats

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Introduction
Intermarket
Parabolic

Nirvana
News
Point & Figure
Cyclic/Seasonal

Internal Progrm
Third System
Margin

Historic Range
Commitment
Volatility

Random Chart
Options
Calend Spread

Level Table
Other Factors
Recommendation

35

46
01          2
1


Introduction

The Mexican Peso took a big hit when Donald Trump got elected President. The fear was that an emerging trade war and tariffs would devastate the Mexican economy, which was already suffering from slow growth. As time rolled on, it rapidly became apparent that the Republicans were not going to be able to get their act together on trade policies, which could also hurt the U.S., and mostly likely little or nothing would be done regarding existing trade agreements. That caused a resurgence in the Mexican Peso back more or less to where it was before the U.S. election. Upcoming Mexican elections may be supportive for the Mexican Peso giving it added surge, especially since Mexico's central bank as aggressivelly raised interest rates to 7% while the U.S. seems stalled on raising interest rates indefinitelyi.


Intermarket Analysis

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




Parabolic Chart

September Mexican Peso:

Parabolic Chart


Nirvana Chart

September Mexican Peso:

Initial Chart


News Analysis

Recently, the Mexican Peso was pushed to a four-year high and was the world's best currency performer up until June. Some say seasonality might cause the Mexican Peso to experience a bought of weakness. Most the Peso declines in the past have occurred in August. The Dollar-Peso appears to be finding short-term technical support. The Peso exchange rate with the Dollar had been experiencing a plunge following President Trump's election and the threat ot trade wars. Mexico's central bank took steps at one point to buoy the battered currency. But Trump officials signaled in a draft memo to Congress that they don't plan a wholesale rewrite of the NAFTA free trade agreement. It was just another example of Trump's brag and bluster to get elected followed by no action. However, NAFTA talks are still dragging on, causing the Peso and Canadian Dollar to lose some of their luster.

Mexico is pulling out all stops to stop the decline of the Peso. That includes four interest rate hikes since the U.S. election. One Peso remains near 5 U.S. cents or its all-time low.

An election victory by the ruling party in Mexico's biggest state (State of Mexico) was a critical test for Enrique Pena Nieto, Mexico's president, ahead of a presidential vote next year. Stability is suggested by the fact that Mexico has been controlled by the PRI ruling party for the last 88 years, but advances by the leftwring Morena Party have been worrying investors. The PRI also struggled in the State of Coahuila, which was one of its former strongholds.

Banixco is Mexico's central bank, which has raised rates to 7.00% after being alarmed at the rate of inflation in Mexico. It's 2017 growth forecast is a GDP of 0.7%. The 7% rate is the highest in eight years.

Much of the wiping out of trade-war fears have brought the Mexican Peso back to slightly stronger than it was at the time Trump was elected.

The Peso's unexpected strength comes as investors and analysts sense a softening of Mr. Trump's actual policy toward NAFTA and relations with Mexico in general. Trump's campaign rhetoric contributed significantly to the decline of the Peso earlier.

Trade war possibilities are more limited by a weak Dollar and strong Peso, which favors U.S. exporters. Keeping Mexico stable is also a big consideration, as trade wars could destabilize Mexico, and the cost of having a contiguous nation that is unstable could be staggering.

There has been some push from President Trumpl to devalue the Dollar in order to be competitive in the international market place, increase exports, and bring manufacturing jobs back to the U.S. Those goals almost require softening the Dollar. Foreign investment in Mexico has increased as a result of the recently-privatized Mexican oil industry. A comopany from Italy announced the discovery of a significant oil reserve in the Gulf of Mexicoi off the coast of Tabasco. It's the first oil discovery in Mexico by a private comany since 1938.


Point & Figure Chart


595.0I                                                                  T  8/17
     I CME - Sep-17 Mexican Peso 500K P, c/100 P   Cm.=0.01  Lim.= 0.6
     I
     I
     I
575.0I_________________________________________________________________________
     I
     IO
     IOX X                             X
     IOXOXO                            XO
555.0IOXOXO____________________________XO______________________________________
     IOXOXO                            XO
     IOXOXO    X                       X
     IOXOXO  X XO                      X
     IO O O  XOXO                      X
535.0I____O__XOXO______________________X_______________________________________
     I    O  XOXO                      X
     I    O  XO O        X             X
     I    O  X  O        XO  X     X X X
     I    O  X  OX X     XO  XO    XOXOX
515.0I____OX_X__OXOXOX_X_XOX_XO____XOXOX_______________________________________
     I    OXOX  OXOXOXOXOXOXOXO    XOXO
     I    OXOX  O OXOXOXOXOXO O    XO
     I    OXOX    OXOXO O OXO O    X
     I    O OX    O OX    OXO O    X
495.0I______OX______OX____OXO_O____X___________________________________________
     I      OX      OX    OXO O    X
     I      OX      O     OX  O    X
     I      O             O   O    X
     I                        OX   X
475.0I________________________O_O__X___________________________________________
     I                        O OX X
     I                        O OXOX
     I                        O OXOX
     I                          OXOX
455.0I__________________________OXOX___________________________________________
     I                          O OX
     I                            OX
     I                            OX
     I                            O
435.0I_________________________________________________________________________
     I
     I
     I
     I
415.0I----I----I----I----I----I----I----I----I----I----I----I----I----I----I---
          1                1111111
      78992122445666667778800111111145558
      23220201010012220121212001110220120
      41257986543803476270308790053562829
The above chart is giving a conventional buy signal.


Cyclical and Seasonal Factors

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

Cyclicals Cyclicals Seasonals
Seasonals


Internal Program

Our best-performing internal program is "Project." It is giving a sell signal.

Internal Printout 1

Results of "Project" for Mexican Peso (blue lines = successful trades, red, unsuccessful): (Not always in the market.)

Results


Third System Confirmation

Our third system is working on a long term 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


Margin

The point value is $500. Initial margin on a single contract is $1,634. Use of options is NOT advised.


Historic Range

Scale trade buyers are entering the market for the long term in this price range, although scale trading has less meaning in absense of a "cost of production.".

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. Large speculators 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 a change in major trend to down is imminent near a volatility low point.

Range/Volatilitiy Chart


Possible Future Prices

Random Chart


Option Recommendation

There are simply not enough options available on this product to make it advisable to trade them.


Calendar Spread

What the Sep. - Mar. calendar spread suggests to us is that buying the near contract and selling the far one is at some times not 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 13.00 or narrower selling the far as prices are falling and then buying the near, and exiting or entering when it is at 17.00 or wider buying the far as prices are rising and then selling the near. At this time, we appear to be midway with no particular trend detected in either direction.





Level Table:

Level Table

The path of least resistance is up.
575.0|                                                                  T  8/17
 CME - Sep-17 Mexican Peso 500K P, c/100 P   Cm.=0.01  Lim.= 0.6
     |
     |Y
     |XXXYYYY[[
555.0|XXYYYYYYYZZZZ[[   <<<
     |XYYZZZZZZZZ
     |VWWWWXXZ
     |VVVWWWWWWWXX
     |VVVVWWWWXX
535.0|VVWXX____________________________________________________________________
     |UUV
     |UUUUU
     |FRRRSTTUUUUUUUU
     |AAAAFFQRRRRSSTTTTTU
515.0|AAAAABBBEEFFQQQQQQQQQRRRRRRSSSSSTTT______________________________________
     |AAAABBEEEEEFFFQQQQQSSSSSSTTTT
     |ABBBBEFFPPPPSSTTTT
     |AABBBDDDEEEFFFPPPPS
     |BDDDEEEFFFP
495.0|BBBDFFFFFOOOP____________________________________________________________
     |BCDDDDFFFOOOOPPPP
     |CCCCDFFNOOOOOP
     |CCCCCCCDFNNOOOOO
     |CCCCCFFNNOO
475.0|FFNNN____________________________________________________________________
     |FFGGHJJJMMNNNNNNNN
     |FFGGGGGHHHJJJJJJMMMMM
     |FFGGGGGGHHHHHHJJJKKKKMMMMM
     |FFGGGGGGHHJJKMMM
455.0|GGKLMM___________________________________________________________________
     |GGKKLMM
     |GKKKKKLLL
     |KKKLLLL
     |KLLLLL
435.0|LLLLL____________________________________________________________________
     |
     |
     |
     |
415.0|-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= 0.429
               1 1 1 1 1 1                                            
       8 9 9 9 0 0 1 1 2 2 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8           8
       1 0 1 3 1 2 1 2 1 2 1 2 0 2 1 2 0 2 0 2 0 2 0 1 0 1           1
       9 1 6 0 4 8 1 8 2 7 1 6 9 4 0 4 7 4 8 2 6 0 5 9 2 6           7


Other Factors

Multiple Chart Indicators Summary
Multiple Chart Indicators Summary


Here's an intraday chart for a previous day ( 8/17 ).

Intraday Chart


                 Risk Versus Opportunity Report
                ________________________________

                PXU7    September Mexican Peso

                      High Price:  573.9
                   Current Price:  560
                       Low Price:  553.1

                            Risk:  0.024
                     Opportunity:  0.049

                    (O/R) Ratio =  2.014


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 + 4
Place 9 September Mexican Peso on a Buy Watch with stoploss @ -8 .92 below the get-in point when recent price is represented as "560.0".
____________________________________________________________________________________________________________________________________________C.T.