USD/MXNTechnical Forecast: Bearish
The Mexican Peso has enjoyed another good week against the US Dollar after corrective pressure saw USD/MXN trade higher after the announcement of the Pfizer vaccine. The pair is now positioned again just above the 76.4% Fibonacci retracement level from the 18.55 – 25.46 surge, a key area sellers will need to break below in order to consolidate further downside momentum.
USD/MXN Daily chart (11 February – 20 November 2020)
Given risk-on sentiment was halted at the beginning of November just above the 20.00 pesos mark, a sustained break below this level is likely to attract more sellers. The question now is whether the Mexican Peso is able to enjoy a few days of relative strength without facing a strong upward reversal. In situations like present, where news headline spark rapid moves, we are likely to see increased profit-taking on speculative positions, which could be the motive behind a possible price reversal if we do in fact see USD/MXN break below 20.00.
If we turn to the equity market, we can see that despite downside corrections that took place mid-week, positive momentum remains strong, alluding to continued risk-on drive which would benefit the Peso. If so, our next price target will be 19.87, previously held as a resistance area before the Covid-19 induced surge back in March.
On the flip side, if risk-on sentiment falters and we see a new upward reversal, immediate resistance can be found at the descending trendline from the highs back in March, which has recently come back in to play after been broken to the upside. This means 20.30 could offer an area for new sellers to come in to the market, before focusing on the next resistance at last week’s highs around 20.69, followed by the psychological 21.00 mark, where the 50-day simple moving average is now converging.
--- Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin
