- The US dollar initially did try to rally a bit during the trading session on Friday, but you can see we have sold off again against the Mexican peso, which makes quite a bit of sense.
- We have been doing this pattern for a while now where we are just simply rounding back down and it looks like we are going to grind lower. The 19 Mexican peso level underneath, I think is your initial target, but who knows how long it will take.
- The beauty of this pair though, is that the interest rate differential is enough that you get paid every day to be patient. And that’s why it’s one of the favored currency pairs of those who are looking for carry. And that actually is a little bit different in this case than it is many other pairs as it’s actually the Mexican peso that offers more swap than the U S dollar.
On the Rally, Opportunity
Ultimately though, the market rallying a bit from here is possible because we have sold off for a couple of weeks, but I think the 200 day EMA needs to be watched very closely near the 19.70 Mexican peso level. Speaking of this area, it’s an area that also features the 50 day EMA dropping and it looks like it is trying to break down below there to kick off the so-called death cross. That’s the typical behavior of this pair. So, I think we are starting to see a lot of stresses being wrung out of this market as it looks like trade between America and Mexico will clearly continue and the ire of President Donald Trump seems to be other places than Mexico and you’ve seen this pair behave accordingly. At this point, think rallies are sold into and I think if you’ve got a part of your portfolio that you’re looking to invest in swap, this might be a good place to do it.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.