Trading AUD/MXN

In the case of AUD/MXN, the influence of the Australian dollar can overpower the impact of the Mexican peso.

Those that already trade the AUD/TRY and USD/MXN may find it easier to get up to speed with the AUD/MXN.

• Liquidity – The Mexican peso experiences substantial liquidity due to its high-interest rates, commercial activity and trade agreements with the US. This can help ensure spreads remain competitive.
• High-interest rates – Due to high-interest differentials, both the AUD and MXN can serve as carry trades in other currency pairs such as AUD/JPY and USD/MXN.

Cons Of Trading AUD/MXN

• Understanding – Generally, there is less market information and publicly available future forecasts on exotic pairs compared to popular majors and minors. For those that live outside of the respective countries, it can be harder to gauge the economic environment and geopolitical landscape.
• Expensive – Brokers tend to charge higher prices due to the risky nature of exotic pairs. As a result, bid-ask spreads may be wider versus majors.
• Availability – Not all brokers offer exotic pairs such as the AUD/MXN. Traders may need to shop around to find the right online broker that offers the currency pair.
• Volatility – Forex trading is already a risky investment vehicle, but exotics can prove particularly volatile.

• Whilst this can mean serious profits, it can also lead to large losses.Users need to ensure they take a careful approach to risk management.

AUD/MXN Day Trading Strategy

Timing

While forex trading runs 24/5, certain periods offer higher levels of liquidity and volatility.Trading during these times can help ensure profits cover costs.

The Australian trading session typically runs between 23:00 and 05:00 GMT while key Mexican trading times run from 14:30 to 21:00 GMT.Because these sessions don’t overlap, there isn’t an obvious ideal trading window.With that said, the Australian trading session typically sees high levels of activity and trading 30 minutes to 60 minutes before economic releases or 1 to 3 hours after announcements also offers decent liquidity.

Risk Management

Due to the volatile nature of exotic forex pairs, it’s key that traders take measures to manage risk. Not risking more than 1 to 2% of your total capital in a single trade, for example, can help to limit your risk exposure. So when looking at AUD/MXN technical charts, buy and sell rates and future forecasts, it’s important to factor in where you’ll place your risk parameters.

USD/MXN

For traders unfamiliar with the AUD/MXN, the USD/MXN is an interesting pair to keep an eye on. Live charts, price predictions and market data are more readily available on the USD/MXN and the pair can help you can understand the Mexican peso component.

News

AUD/MXN traders should keep on top of financial and economic news announcements.

For example, reports on inflation rates, GDP data and export production can all impact the price of the AUD/MXN.

Particularly useful online resources include:

• Bloomberg
• IG
• Investing.com
• Yahoo Finance

These sources offer live price charts, historical exchange rate data and market sentiment.

Understanding The AUD

It is important to understand the AUD to MXN exchange rate history and the influences on price movement.

In 1966, the Australian dollar replaced the Australian pound and in the following year, it was pegged to the US dollar until 1983 when it became a free-floating currency.

Key influences on the currency include:

• Commodity prices – The Australian dollar is a commodity currency, so the prices of its main exports like metals and grains are strongly tied to its value. Australia primarily trades with Asia’s developing economies such as China and India.
• Central bank policies – The Reserve Bank of Australia makes important decisions on interest rates and inflation. Keeping an eye on monetary policy announcements will help you make future forecasts about the value of the Australian dollar.
• Balance of payments – Australia’s account deficit is an important detail to analyse as it informs of the country’s trade balance, income payments and other transactions between its economy and other countries. A deficit in the country’s balance of payments can harm the strength of the currency.

Understanding The MXN

Before the late 18th century, the Mexican peso was the benchmark for all North American countries such as the United States.

The country retained the peso as its currency after achieving independence from Spain in 1821. The Bank of Mexico was established in 1925, giving it the authority to produce banknotes. The current form of the peso, known as the Nuevo peso or MXN, was introduced after the oil crisis of the 1970s.

Several factors influence the MXN currency, including:

• Proximity to the United States – Mexico’s trade relationship with the US is critical, as stable commercial interactions contribute to the liquidity of MXN. For example, in 2019, the US exported $256 billion worth of goods to Mexico and imported $358 billion worth of goods, significantly impacting the USD/MXN exchange rate.
• Oil prices – As the world’s ninth-largest oil producer, Mexico’s economy has historically been reliant on oil. The MXN also has a close correlation with other Latin American commodity-based currencies like the Brazilian real and Colombian peso. The weekly US oil inventory can also have a significant impact on the USD/MXN exchange rate.
• Central bank policies – The Bank of Mexico makes decisions regarding the country’s interest rates and other important factors that can affect the value of the Mexican peso.

Related Currency Pairs

Traders should pay attention to the relevant currency correlations with AUD/MXN. Currency pairs do not move independently of each other, and the success or failure of one pair can reflect in another. For example, we previously noted the correlation between AUD/MXN and USD/MXN.

• Positive correlation – This occurs when pairs move in the same direction.

The AUD/USD, GBP/USD, and EUR/USD pairs have a positive correlation due to the US dollar being the counter currency. On the other hand, the USD/CHF, USD/JPY, and USD/CAD pairs have a negative correlation because the US dollar is the base currency. Traders can potentially profit from market volatility when trading the exotic AUD/MXN pair, but it is more suitable for experienced traders. It is recommended to open an account with a regulated forex broker that offers the necessary tools and features to make accurate AUD/MXN forecasts. As for converting 1 AUD to MXN, the exchange rate is continuously moving, and online currency converters can be used for buying and selling. Whether or not to invest in AUD/MXN depends on personal preference and investment goals.