USD/MXN: NAFTA uncertainties and technical analysis

Bloomberg identified three key uncertainties for traders around the NAFTA deal between the U.S., Mexico and Canada. By the end of this week it is expected that the U.S. and Canada will reach a preliminary agreement on NAFTA renewal.

1. The final date for the agreement is still uncertain. According to the rules of Congress, the administration of Robert Lighthizer has 30 days to present the official text of the agreement between the U.S. and Mexico. From there, the agreement can be signed and then approved by congress 3 months after the announcement. This means that there will be plenty of time for last-minute changes and more conflicts.
2. Any agreement will likely face political resistance. Because any agreement will not go into effect at least 3 months after a preliminary agreement, it is still uncertain whether Congress will be controlled by Republicans or Democrats.
3. The risk of a political conflict (especially between Trump and Trudeau) is high. The ultimatum by Trump that his policy of imposing tariffs will continue if the U.S. and Canada don't reach an agreement on NAFTA.

Technical picture: USD/MXN

Daily chart

We believe the current level is attractive for opening short positions in the direction of the overall trend. The present resistance level is strong: it is a Fibonacci level as well as several previous peaks. DeMarker forms an M-shape and falls below 0.7 from overbought levels.

Entry: 18.995

S/L: 19.208; maximum loss - 1,131%

Source: Bloomberg Finance L.P.