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Dollar vs Mexican Peso Outlook: USD/MXN Plummets to Key Support Zone

Dollar vs Mexican Peso Outlook: USD/MXN Plummets to Key Support Zone

2020-10-12 17:30:00
Michael Boutros, Strategist
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Mexican Peso Technical Price Outlook: USD/MXN Near-term Trade Levels

  • Mexican Peso updated technical trade levels – Daily & Intraday Charts
  • USD/MXN breakdown probing key support zone at 21.2316/2942
  • Risk for topside exhaustion sub-22.0895 – key near-term support 20.8377
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The US Dollar is down more than 4.4% against the Mexican Peso since the start of the month with USD/MXN now probing a key technical pivot zone. We’re looking for a reaction down here as price approaches near-term downtrend support. These are the updated targets and invalidation levels that matter on the USD/MXN technical price charts. Review my latest Strategy Webinar for an in-depth breakdown of this Peso technical setup and more.

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Mexican Peso Price Chart – USD/MXN Daily

Mexican Peso Price Chart - USD/MXN Daily - Dollar vs Peso Trade outlook - Technical Forecast

Chart Prepared by Michael Boutros, Technical Strategist; USD/MXN on Tradingview

Technical Outlook: In my last Mexican Peso Price Outlook we noted that the ”USD/MXN rally is attempting to breach a major technical resistance confluence here- look for possible topside exhaustion on a stretch towards near-term slope resistance.” Price continued to probe downtrend resistance for nearly a week before failing into the close of September trade. A decline of more than 7% off the monthly highs has broken below confluence support at 21.2316/2942 and we’re looking for inflection here.

A hold below this threshold keeps the focus on a key support confluence near channel support at 20.6788- a region defined by the 1.618% Fibonacci extension of the decline off the June highs- look for a larger reaction there IF reached. Bearish invalidation rests at the highlighted region along the upper parallel at the objective October open at 22.0895.

Mexican Peso Price Chart – USD/MXN 120min

Mexican Peso Price Chart - USD/MXN 120min - Dollar vs Peso Trade Outlook - Techncial Forecast

Notes: A closer look at Peso price action shows USD/MXN trading within the confines of an descending pitchfork formation extending off the late-September highs with the pair testing the 21.2316/2942 resistance range early in the session. Initial support now eyed at 21.0499 backed by the lower parallel / September lows at 20.8377 and 20.6788. A topside breach from here would risk a rebound towards 21.5488 with a close above the upper parallel needed to shift the near-term focus higher again.

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Bottom line: The USD/MXN sell-off is now testing a break of a key pivot zone we’ve been tracking at 21.2316/2942 – from a trading standpoint, the risk remains tilted to the downside while within this formation. Look for topside exhaustion ahead of the upper parallel IF price is indeed heading lower. Ultimately a larger breakdown may offer more favorable opportunities with a breach above the monthly open needed to shift the broader focus higher again.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

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Key US / Mexico Data Releases

Key US / Mexico Data Releases - USDMXN Economic Calendar - 10/12/2020

Economic Calendar - latest economic developments and upcoming event risk.

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--- Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex

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

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