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Mexican Peso Outlook: USD/MXN Price- Downside Bias Still in Place

Mexican Peso Outlook: USD/MXN Price- Downside Bias Still in Place

Mahmoud Alkudsi, Analyst

USD vs MXN Technical Forecast

  • Bearish signals on USD vs MXN price chart
  • Will bears keep on going?

USD/MXN – A Multi-Week Low

On Friday, USD/MXN tumbled to 22.004-its lowest level in over ten weeks. The price closed the weekly candlestick closed in the red with a 2.4% loss.

Yesterday, the Relative Strength Index (RSI) declined to oversold territory emphasizing the strength of bearish momentum

USD/MXN DAILY PRICE CHART (Sep 1, 2018 – June 3, 2020) Zoomed Out

USDMXN daily price chart 03-06-20 Zoomed out

USD/MXN DAILY PRICE CHART (Mar 11 – June 3, 2020) Zoomed In

USDMXN daily price chart 03-06-20 Zoomed in

In Mid-May, USD/MXN failed to climb to the higher trading zone then pointed lower generating bearish signals the one after another. The first signal was closing below the 50-day moving average, then closing below 23.315, and the last one was yesterday as the pair fell to the current trading zone 20.962 – 22.041.

A close below the low end of the zone may encourage market participants to press towards 20.260, and a further close below that level could send USDMXN even lower towards 19.912.

In turn, a close above the high end of the zone cancels the last bearish signal mentioned above and could trigger a rally towards 23.315, and a further close above that level may extend this rally towards 24.437.

That said, the weekly support and resistance levels underlined on the daily chart (zoomed in) should be considered in both bullish/ bearish scenarios.

USD/MXN four hour PRICE CHART (May 4 – June 3, 2020)

USDMXN four hour price chart 03-06-20

On May 7, USD/MXN broke below the uptrend line originated from the May 5 Low at 23.738, and generated a bearish signal. Afterward, the price rallied yet respected the uptrend line reflecting that bulls were losing momentum. On May 18, the price broke below the uptrend line originated from the May 11 low at 23.551 then remained trading below this line indicating that bears were in charge.

At present, the market trades below the downtrend line originated from the May 25 high at 22.771 so, any violation of this line would be considered a bullish signal.

A break above 22.140 may trigger a rally towards 22.703. On the other hand, any break below 21.391 could send USDMXN towards the low end of the current trading zone discussed above on the daily chart. Nonetheless, the daily support and resistance marked on the four-hour chart should be kept in focus.

Written By: Mahmoud Alkudsi

Please feel free to contact me on Twitter: @Malkudsi

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