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USD/MXN: A Risk of Price Reversal - US Dollar Price vs Mexican Peso Forecast

USD/MXN: A Risk of Price Reversal - US Dollar Price vs Mexican Peso Forecast

2020-02-05 10:30:00
Mahmoud Alkudsi, Market Analyst
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US Dollar to Mexican Peso Technical Outlook

  • USD vs MXN bears still in charge
  • Mixed signals on USD/MXN chart

USD/MXN – Hesitant Bears

On Jan 20, USD/MXN Tumbled to 18.645 -its lowest level in over fourteen and half months. The market rallied after as some shorts seemed to cover. Similar scenario happened last week, and the market closed the weekly candlestick with a bullish Doji pattern reflecting bears indecision at this stage.

This week, the Relative Strength Index (RSI) remained flat below 50 highlighting a paused downtrend momentum.

USD/MXN DAILY PRICE CHART (April 5, 2018 – FEB 4, 2020) Zoomed Out

USDMXN daily price chart 05-02-20 Zoomed out
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USD/MXN DAILY PRICE CHART (Nov 7– FEB 4, 2020) Zoomed In

USDMXN daily price chart 05-02-20 Zoomed in

From the daily chart, we noticed that on Dec 6 USD/MXN closed below the 50-day average generating a bearish signal. On Dec 12, the market added another bearish signal as it broke below the uptrend line originated form the July 8 low at 18.864 eyeing a test of 18.500. Yesterday, the pair fell to a lower trading zone 18.802 – 18.404 providing a third bearish signal.

A close below 18.302 may embolden USDMXN bears to press towards 17.835. Further close below this level could mean more bearishness towards 17.457. Yet, the weekly support levels underlined on the chart (zoomed in) should be considered as some traders might exit/join the market around these points.

In turn, a close above the high end of the zone reflects bears reluctance. This could lead some of them to exit the market and reverse the price’s direction towards 19.153. In that scenario, USDMXN could develop a double bottom pattern where the neckline resides at 18.976. A break above this level might rally the price towards 19.299. Although, the weekly level marked at 19.153 should be monitored.

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USD/MXN four hour PRICE CHART (Jan 6 – FEB 4, 2020)

USDMXN four hour price chart 05-02-20

Looking at the four- hour chart, we notice on Monday USD/MXN created a lower high 18.891 then pointed lower eyeing a test of the Jan 20 low.

A break below 18.607 could send USDMXN towards 18.500. That said, the support level underscored on the chart should be watched closely. On the flip side, a break above 18.721 may cause a rally towards 18.777. Although, the daily resistance level printed on the chart should be kept in focus.

See the chart to figure out more about key levels to monitor in a further bullish/bearish move.

Written By: Mahmoud Alkudsi

Please feel free to contact me on Twitter: @Malkudsi

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