USD/MXN Highlights:
- USD/MXN remains very heavy, ready for new cycle lows
- It’s been a steady path lower, more of the same expected
- A spike in fear across markets needed to jolt USD higher
USD/MXN remains very heavy, ready for new cycle lows
Price action in USD/MXN has been a real grind, and it’s taking quite a bit to get the Dollar to rise against the much higher yielding Mexican Peso. This is expected to remain the case as long as there isn’t reason to peel off risk in financial markets in a major way, and take the other side of this carry trade.
The grinding downward price action continued this week just after posting a modestly bullish weekly reversal candle last week. Next up in line as support is the August 2018 low at 18.40, followed by the 2018 low, itself, just under 17.94.
These downward grinding moves can lead to momentum with enough time as dip-buyers eventually give up and sellers start to gain firm control. If we don’t see any significant risk-off type event, then this could be the case very soon. An acceleration would be welcomed as it frees up price from the recent congestion, providing a cleaner path to trade.
Keep in the mind the context of the current down-move following the break of a long-term wedge dating back to 2017. If selling starts to pick up, not only will the 2018 lows quickly near, but given the size of the wedge pattern, the 2017 low at 17.44 and worse could come into view in fast order.
To dampen the bearish outlook, a strong rally (likely driven by risk-off) is needed to push USD/MXN at least above 18.97. This won’t turn the picture broadly bullish given price will still be outside the wedge, but it will help build the case for further upside, or at the very least keep shorts at bay.
USD/MXN Daily Chart (could start to break free from congestion)
USD/MXN Weekly Chart (remains broken outside of long-term wedge)
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---Written by Paul Robinson, Market Analyst
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