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USD/MXN – The Dollar May Weaken More vs Peso

USD/MXN – The Dollar May Weaken More vs Peso

Paul Robinson, Strategist

USD/MXN Highlights:

  • USD/MXN drop may continue before a low is found
  • Bounce to test down-move is ideal for new shorts

USD/MXN drop may continue before a low is found

USD/MXN along with other $/EM pairs has been front and center of the dollar’s decline, the exact opposite of when the World’s reserve currency was steam rolling emerging market currencies during the coronavirus panic.

Just a pullback or more? If the pressure continues and we see developed market currencies join in full force, then a significant reversal across the board may be in place. This will take some time to develop before we’ll know more with any conviction. Dollar declines have been short-lived the past couple of years.

Looking at the technical backdrop in USD/MXN, the 2017 high high/top of multi-year trianlge is at its feet. A break below 22 could lead to the 200-day down at 20.53. First, though, it would be ideal to see USD try and recover only to stall and roll over again. Failure to garner momentum beyond 22.83 vs MXN on an up-move would suggest it only corrective in nature and that the path of least resistance is lower.

At the immediate moment it may prove best to sit back and wait for a better look (test of resistance) and/or break of support before running with an aggressive stance. A sharp reversal higher would be reason to pause on the notion of further weakness.

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USD/MXN Daily Chart (support and resistance to watch)

USD/MXN daily chart

USD/MXN Chart by TradingView

USD/MXN Weekly Chart (2017 high as support)

USD/MXN weekly chart

USD/MXN Chart by TradingView

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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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