Trump Sends Peso Loonie

A Trump NAFTA backtrack sees an aggressive rally in both the Mexican Peso (MXN) and the Canadian Dollar (CAD) during the Asia session.

It’s been a tough couple of days for America’s NAFTA partners, Mexico and Canada. Both had been feeling the pinch from lower oil prices before President Trump decided to slap a tariff on Canadian Lumber. The picture got even muddier with President Trump’s announcement yesterday that he intended to withdraw from NAFTA and renegotiate. This saw both the CAD (the Loonie in FX speak) and the MXN come under sustained pressure.

Most particularly the MXN  dream run since late January looked in danger. The central bank intervened to sell USD/MXN above 22.0000 and since, the MXN had rallied all the way back to the 18.4500 regions. The peso had sunk from there back to 19.2950 as off last night with a 1+ % move lower alone yesterday as the U.S. administration tightened the screws.

USD/CAD has been threatening to break out of the topside of its last six months range as well, threatening a sustained break of the 1.3600 level as Mr Trump said lumberjacks are not ok and then said NAFTA was becoming No-FTA.

This all came to an abrupt end this morning in Asia with a Trump volte-face after what must have been an interesting three-way phone call between the respective leaders of each country.

10:35 (US) White House: President Trump agrees to not terminate NAFTA at this time after conversations with Mexico’s Nieto and Canada’s Trudeau – All leaders agree to “enable renegotiation of NAFTA deal” at a later date. – Source

One suspects the renegotiation will be more USFTA than NAFTA, but the effect was immediate, with both the MXN and CAD rallying 2300 points and 100 points respectively. USD/MXN was dropping from 19.2350 to 18.9950 and USD/CAD from 1.3650 to 1.3550 in about the length of time it has taken me to type this. (I use two fingers)

Both currencies will be clearly vulnerable to headlines going forward as they enter the “renegotiation.” The price action illustrates the market’s perception of how intrinsically linked economically, to the whims of the United States, the troublesome neighbours to the North and South are.


The Peso has been on a stellar run since mid-January as Trump-flation gave way to Trump-fatigue and noise about paying for a border wall faded.

Looking at the chart below all is not lost for the peso, however. Yesterdays USD/MXN rally stopped exactly at the 23.6% retracement level of the entire Jan-April move. Thus, 19.2950 becomes the first major resistance followed by the 200-day moving average at 19.6117.

Support is clearly denoted by the double bottom formed this month at 18.4470. Behind this are the lows of the Trump election day at 22.1606 which shows just how impressive the Peso rally has been.



The Loonie has been mired in a 1.3000 to 1.3600 from September last year. Oil prices, a weaker USD in the new year, and asthmatic economic data have combined to cancel each other out. This has all changed in the last week or so, as the three amigos combined to push in one direction, most particularly a stronger USD and weaker oil prices following last week’s CPI undershoot.

The technical picture is less clear in this currency pair. USD/CAD has support at the overnight low at 1.3528 with a break suggesting a move back into the range and drifts to the 1.3400 regions. Interestingly if USD/CAD closes below 1.3542 today (yesterday’s low), it will have traced out an outside reversal day. In this case, a bearish formation.

Resistance sits at today’s high around 1.3650 with a break and consolidation above  1.3600 suggesting a technical move to 1.4000 will occur going forward.




Both the MXN and CAD will be vulnerable to NAFTA-driven headlines going forward. Particularly due to the penchant of the U.S. President’s penchant for policy u-turns at short notice. The MXN has enjoyed an amazing multi-month rally and the price action of this week in itself is but a flesh wound to the overall move. The CAD, however, could be potentially more vulnerable to the bad news suddenly being priced in is really only just possibly beginning.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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