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USD/MXN, MXN/JPY – Peso Poised for More Selling vs Dollar, Yen

USD/MXN, MXN/JPY – Peso Poised for More Selling vs Dollar, Yen

Paul Robinson, Strategist

Mexican Peso Highlights:

  • USD/MXN trying to gun for resistance
  • MXN/JPY on the verge of breakdown

Peso poised to continue sell-off

USD/MXN started circling back higher earlier this week and gained momentum yesterday, putting it in position to take on and potentially take out resistance. A close above 23 is seen as putting the Dollar in charge vs the Peso as it rounds its way toward turning a bounce into a rally.

A breakout above the 23 level could quickly have the area near 25 in focus, especially if stocks begin to weaken again. For now, getting above resistance is first up. Failing below 21.88 would be the first warning sign that resistance is not only holding, but that selling wants to reassert itself.

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USD/MXN Daily Chart (resistance to overcome)

USD/MXN daily chart

USD/MXN Chart by TradingView

Turning to MXN/JPY, this one really follows along with the behavior of the stock market on a correlation-basis (due to its massive carry), but in terms of magnitude it goes down harder than it goes up with the stock market.

Highlighting the sensitivity to the stock market is a 3-mo correlation of 0.79, but often trading close to 0.90 and higher. If stocks rally hard it may firm up, but if they roll over then look for those spring time lows to come into play.

This makes MXN/JPY a potentially easier short candidate as a stock market proxy than it does an option for being long stocks through FX. Trade below 4.64 and a retest of the low from April could be in the works down in the 4.22-area.

MXN/JPY Daily Chart (watch support, then lows)

MXN/JPY daily chart

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

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

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