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USD/MXN Price Volatility Continues as Pair Probes Topside Barrier

USD/MXN Price Volatility Continues as Pair Probes Topside Barrier

Peter Hanks, Strategist

USD/MXN Forecast:

  • The Mexican Peso suffered in the month of March alongside other emerging market currencies
  • As safe haven demand drove the US Dollar higher, a remarkable decline in crude oil undermined the Mexican Peso simultaneously
  • With the recent rebound slowing down, USD/MXN may continue higher with persistent volatility

USD/MXN Price Volatility Continues as Pair Probes Topside Barrier

The Mexican Peso suffered another decline versus the US Dollar on Wednesday, falling more than 2.75%. While other volatility metrics have receded, USD/MXN has been somewhat of an outlier as the pair continues to post significant daily moves. While some degree of volatility is to be expected - relative to EUR/USD for instance - it can be attractive for traders in search of raw price action.

USD/MXN Price Chart: Hourly Time Frame (March 2020 – April 2020)

USD/MXN price chart hourly

Chart created in TradingView. Average True Range in crimson.

To that end, the pair’s 10-day average true range reveals the degree to which USD/MXN has fluctuated in recent weeks. Since the outlook for the global economy is declining almost daily, emerging market currencies and those with heightened exposure to growth-sensitive commodities like crude oil may continue to slip. With that in mind, USD/MXN is in a strong position to continue higher in the weeks ahead barring a significant shift in sentiment.

Therefore, USD/MXN may make another attempt at the 24.6417 level – an area that has resisted recent attempts higher. Resistance above 24.6417 should reside at the swing-high posted on March 24 around 25.4587. A break above the peak would suggest bulls are willing to continue higher and could, as a result, see prior resistance turn to support.

Renewed risk appetite would favor USD/MXN and may allow the pair to probe support beneath around the Fibonacci level at 23.3739. Should it fail, subsequent assistance may be offered from an ascending trendline drawn off various swing-lows in March. Either way, the technical levels outlined will look to provide influence over price in the days ahead and heightened volatility may see rapid price developments ripe with trading opportunities.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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