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Trading AUD/MXN

Written By

James Barra

Written By

James Barra

James is an investment writer with a background in financial services. As a former management consultant, he has worked on major operational transformation programmes at prominent European banks. James authors, edits and fact-checks content for a series of investing websites.

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Edited By

Jemma Grist

Edited By

Jemma Grist

Jemma is a writer, editor and fact-checker focused on retail trading and investing. Jemma brings a unique perspective to the forex, stock, and cryptocurrency markets and works across several investment websites as a researcher and broker analyst.

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Fact Checked By

William Berg

Fact Checked By

William Berg

William contributes to several investment websites, leveraging his experience as a consultant for IPOs in the Nordic market and background providing localization for forex trading software. William has worked as a writer and fact-checker for a long row of financial publications.

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Updated

Sep 13, 2024

The AUD/MXN is a popularly traded exotic forex pair. It reflects how much the base currency, AUD, is worth against the counter currency, MXN. The Australian dollar is the fifth most traded currency with relative stability while the Mexican peso promises liquid access to South America which has seen rapid market growth in recent years. This article is a guide to day trading the AUD/MXN, from tips and risks to live price charts and exchange rate history.

Chart

Pros Of Trading AUD/MXN

• Volatility – Exotic pairs, like the AUD/MXN, have high volatility. Frequent price changes provide day traders with many opportunities to turn a profit. The AUD and MXN are also commodity currencies whose relative strength depends on the success of their export-based economies.
• Predictability – Exotic pairs can be easier to predict than majors or minors. 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 – Forex trading platforms 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 and 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 continued to use the peso after gaining independence from Spain in 1821. The Bank of Mexico was established in 1925, which was granted the right to print banknotes. The Nuevo peso, which is the MXN we know today, was created after the oil crisis in the 1970s.

Key influences on the currency include:

• Proximity with the United States – The trading relationship between Mexico and the US is key as stable commercial interactions contribute to MXN’s liquidity. For context, in 2019, the US exported $256 billion of goods to Mexico and imported $358 billion worth of goods, which added significant liquidity to the USD/MXN.
• Oil prices – As the ninth-largest oil producer in the world, Mexico’s economy has historically been dependent on oil. It also shows a tight correlation with other Latin-American commodity-based currencies like the Brazilian real and Colombian peso. The weekly U.S. oil inventory can also have a strong effect on the USD/MXN.
• Central bank policies – The Bank of Mexico makes decisions on the country’s interest rates and other important factors that can increase or depreciate the value of the Mexican peso.

Linked Currency Pairs

Traders should take note of relevant currency correlations with the AUD/MXN. Currency pairs don’t move independently of each other. The success or failure of one pair can be reflected in another. For example, we previously mentioned the correlation between the AUD/MXN and the USD/MXN.

• Positive correlation – This is when pairs move in the same direction as each other. The AUD/USD, GBP/USD, and EUR/USD pairs are positively correlated. This is a result of the US dollar being the counter currency.
• Negative correlation – This is when forex pairs move in the opposite direction. The USD/CHF, USD/JPY, and USD/CAD are good examples. They are negatively correlated because the US dollar is the base currency.

Final Word On Trading AUD/MXN

The AUD/MXN pair has promising qualities that may allow traders to generate profits from market volatility. However, as an exotic pair, it is more suited to experienced traders. We’d recommend opening an account with a regulated forex broker that offers all the tools and features needed to make accurate AUD/MXN forecasts.

FAQ

How do I convert 1 AUD to MXN?

The AUD to MXN exchange rate is continuously moving. Head to one of many online currency convertors to buy and sell AUD to MXN.

Should I invest in AUD/MXN?

As a popular exotic forex pair, it has good attributes that make for an interesting investment vehicle. With that said, language barriers, volatility risks and limited information online can make it challenging versus other established pairs.

How can I trade AUD/MXN?

Firstly, you need to open an account with a broker that offers the AUD/MXN. It’s also important to check spreads and commissions as they tend to be more expensive than on majors or minors. Other factors like security, regulation, plus deposit and withdrawal methods are useful considerations.

What is the meaning of AUD/MXN?

This forex pair consists of the base currency, AUD and the counter currency, MXN. This shows how much the AUD is worth against the MXN. For example, if an AUD/MXN quote is 16.08, this means 16.08 MXN is worth 1 AUD.

What affects the AUD vs MXN rate?

Each currency is affected by its central bank’s monetary policies. On top of that, as a commodity currency, The Australian dollar is highly affected by global commodity prices. Mexico is also a key oil producer, which means changes in global oil prices can either positively or negatively impact the strength of its currency. It’s also worth keeping abreast of relations and trade agreements between the US and Mexico.