Mexican Peso falls on trade-hawk Lighthizer rumors

• The Mexican Peso weakens on rumors Donald Trump has offered the job of trade representative to Robert Lighthizer. 
• The former US trade rep is known for his protectionist stance and could squeeze Mexico in future talks.  
• The Peso is further weighed by concerns the Republicans will win a majority in Congress, giving them a "clean sweep".  

The Mexican Peso (MXN) edges lower in its key pairs on Monday after ending last week on a negative note. The Peso lost 1.86% against the US Dollar (USD) on Friday after the Financial Times (FT) published a story about President-elect Donald Trump offering US attorney and known protectionist Robert Lighthizer the job of US Trade Representative, a post he held under Trump's previous administration. Lighthizer is known to be a tough negotiator after representing the US in the current free trade agreement negotiations between the United States (US), Mexico, and Canada, the USMCA. 

MXN weakened on fears that he will take an equally tough stance when the agreement comes up for renegotiation in 2026. In the run-up to the election, Trump vowed to hit Mexican auto imports with massive tariffs in an attempt to curb the number of cheap Chinese electric vehicles made in Mexico flooding the US market. 

Mexican Peso declines on rumors of Lighthizer appointment

The Mexican Peso weakened overall at the end of last week after the FT reported that Donald Trump had offered Robert Lighthizer the job of US new trade chief. However, an article in Reuters on Friday said the opposite: one of its sources in the White House had called the rumors "untrue," and Lighthizer had not been invited to take the role.

Another potential risk for the Peso emanating from north of the border is the increasing likelihood that the Republican party will win a majority in the US Congress. Republicans have already won the presidency and a majority in the US Senate. If they also secure a majority in Congress, it would give them a so-called "clean sweep", with much greater powers to push through their legislative agenda without resistance. In addition, six out of the nine US Supreme Court justices have been appointed by Republicans, suggesting they also have the balance of power in an important counterweight to the legislator. 

Votes for Congress are still being counted. However, the Republican party has won 214 seats to the Democratic party's 203, with only 18 outstanding, according to the Associated Press. The threshold for a majority is 218.

According to forecasts by El Financiero, a Republican majority in Congress with Trump as President could lead the Peso to weaken even further against the USD. They estimate a band of between 21.14 and 22.26 for USD/MXN in such a scenario. The pair currently trades in the 20.00s. 

If the Republicans fail to win a majority in Congress, however, the pair is likely to end up in a range between 19.70 and 21.14, says El Financiero. 

On the economic data front, the Peso could see volatility later in the week when the Bank of Mexico (Banxico) meets on Thursday for its November policy meeting. Although recent inflation data came out higher than expected, experts still see a good chance of Banxico cutting the bank rate by 0.25% to 10.25%. Such a move would be negative for the Peso since lower interest rates attract lower foreign capital inflows. 

Monday sees the release of the Industrial Production data for September and Consumer Confidence for October, while in the US bond markets are closed for the Veterans' Day public holiday.

Technical Analysis: USD/MXN potentially unfolding abc pattern higher

USD/MXN recovers from the base of its rising channel and starts to extend higher in line with the broader uptrend. 

USD/MXN Daily Chart 

The pair seems to be renewing its short-term uptrend. It is already in an established medium and long-term uptrend. As the old technical analysis saying goes "the trend is your friend", suggesting the odds favor more upside to come. 

The bullish thesis is further supported by the 4-hour chart, which shows a possible three-wave 'abc' pattern, or "Measured Move," unfolding. Waves 'a' and 'b' look to have been completed, and there is a possibility that wave 'c' is about to stretch higher. 

USD/MXN 4-hour Chart 

This final wave 'c' should be at least a Fibonacci 61.8% of wave 'a', indicating a likely endpoint at 20.40. A break above the top of wave 'a' at 20.28 would provide verification. 

For more confidence that the uptrend has resumed, traders should wait for a break above the 20.80 high of November 6. Such a move would probably confirm more gains ahead, with 21.00 as the next key target and resistance level (round number, psychological support).