Emerging Market FX: USDMXN Long Play

Emerging Market FX: USDMXN Long Play

Yesterday the Mexican government reported that the GDP proxy rose a modest 0.1% mom in November 2015 versus October 2015 (seasonally adjusted, non-annualized). This growth rate is consistent with a quarterly real GDP growth rate of 0.7% in the final quarter of 2015 (nonannualized) and with year-on-year growth of 2.6% in the quarter. Barring revisions to historical data, real GDP growth would have averaged 2.5% last year. By sector, the 0.3% monthly increase in services GDP compensated for the declines of 0.7% mom and 0.5% mom in primary and industrial GDP, respectively. These figures resulted in a 2.7% yoy increase in the unadjusted series in November, which beat median market consensus as per the latest Bloomberg survey of a 1.9% yoy increase.

On a separate note, the seasonally adjusted unemployment rate was 4.4% in December, above the median estimate as per the latest Bloomberg survey of 4.1%. Throughout 2015, the seasonally adjusted unemployment rate averaged 4.4% yoy and had low variance, ranging only from 4.2% yoy to 4.5% yoy. Finally, retail sales figures for November are due today at 9:00 am EST. According to the latest Bloomberg survey, the median estimate is that retail sales rose 0.5% mom in seasonally adjusted terms in November, which would yield in a 4.7% yoy increase. As a reference, retail sales rose 0.3% mom in October versus September (seasonally adjusted, non-annualized) due to monthly expansions in seven out of nine spending categories.

Technical & Trading Takeaway

From a technical perspective the USDMXN maintains its uptrend in the near term, higher highs and higher lows within a clearly defined daily uptrend channel.

I would like to use current weakness to enter long positions targeting a retest and or break of highs. I will venture long through yesterdays highs at 18.5470 placing a stop below today’s low targeting 19.0000

Trading Update: Stops To Entry 18.547

Trading Update: Target Achieved Flat at 19.000 +4530pips

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