- The US dollar has drifted a little bit lower against the Mexican peso during the trading session on Wednesday as we continue to grind lower overall.
- We recently had formed the so-called death cross when the 50-day EMA breaks down below the 200-day EMA indicator, showing signs of long-term weakness.
- If this keeps up, there will be a lot of longer-term traders jumping in as well.
The 19 level underneath is a major support level, as well as major resistance, and of course, a large round psychologically significant figure. With all of that being said, I think it is important to pay close attention to that level because I do believe that there will be a bit of a reaction. The US economic numbers on Wednesday were pretty poor. We had the ISM services PMI number coming out at 49.9, which is just one tick below the overall contractionary level.
Another Number That Spooked Traders on Wednesday
Now, that being said, we also had the ADP non-farm employment numbers come out weaker than anticipated, but that is not the real jobs number. So, keep that in mind. If we do get a little bit of a bounce here, I would be looking to short this USD/MXN pair near the 19.50 level where the moving averages are starting to drop toward. If we break down to the 19 level and break below there, then I think we go to the 18.5 level.
This is a market that certainly looks like it’s got a lot of negativity built into it. And of course, you do get paid to hang on to a short as the Mexican Central Bank offers about a 3 % differential between it and the United States. So, with that, I do favor the downside as the trade war between the United States and Mexico seems to have cooled down.
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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.