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Both the Mexican peso and the US dollar’s movements are greatly affected by the US presidential election set on November 8, 2016. Campaigns and appearances from both the Democratic and Republican parties have been quite controversial as of late, now that the election is fast approaching in less than a month.

The Mexican peso in particular had been clamped down since May on Republican Party nominee Donald Trump’s vows to fix immigration and revise trade relations. In particular, the Republican pledged he would build a wall on the border with Mexico, and revise or cancel the North American Free Trade Agreement (NAFTA) should he be elected as the new president of the US.

However, the peso soared and hit one-month highs on Monday as markets slashed the odds of Trump’s victory in the elections. The said nominee is facing his biggest crisis so far in his movement.

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In a video posted on Friday, Trump is heard talking on an open microphone in year 2005 about groping females and trying to seduce a married woman. This controversy not only placed Trump into the principal disaster of his 16-month-old campaign, but also deepened the gap between him and establishment Republicans.

With this, the Mexican currency climbed about 2% to 18.91 to the U.S. dollar at one point in early Asian trading hours— its highest in almost a month. The peso previously plunged to a record low against the dollar in September, on worries that a Trump victory would jeopardize Mexico's exports to the US, its single largest market.

USD/MXN was down by 2.13% to 18.93 as of 12:15 GMT, with the Mexican peso still holding on to gains after the second presidential debate between Trump and Democrat Hillary Clinton ended. In an opinion poll among US voters, Clinton emerged as the victor of the second debate. The Democratic candidate had also won the first one previously.

A Clinton victory pushes the Mexican peso higher, as it douses the chance for Trump’s plans regarding relations with Mexico.

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While the dollar is firm at 96.81, the political episodes are proving more and more positive for the peso. Will this situation extend the Mexican currency’s rally further?

The answer: Indeed, the peso is likely to advance from its current point. However, the said currency is unlikely to break above the trading ranges seen since June, even if additional position-squaring occurs. Implosions of the Trump campaign would only tack us to the levels between the 18.00 to 19.00 consolidation areas.

The Mexican peso was definitely stronger overnight, but there is little benefit in setting outlooks from the results of a debate or of the consequent moves in markets. On the chart below, USD/MXN dived from the previous candle as markets digested the second presidential debate.

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With how the Bollinger bands are presented, it is likely that the USD/MXN pair will continue to decline. It has just freshly broken out from a narrow-range trading, and the lower band latched on the candle is a hint of a likely bearish trend to follow.

September 26 marked the first presidential debate when the Mexican peso was at its lowest and the US dollar trading higher. However the next day, the peso proved to be the biggest gainer as the forex pair plunged lower on Clinton’s announced victory in the aforementioned debate.

The US presidential elections are more relevant than ever to the Mexican peso. This historic event in American politics will greatly affect the market, and not just in forex.

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