- The US dollar did fall a bit during the trading session on Friday against the Mexican peso, but we continue to see the 18.50 level offer a bit of support.
- This is an area that’s been important a couple of times.
- So, the question now is, can we finally break down below there? With the way this pair tends to move, I’d be comfortable waiting for a daily close below that level before I started shorting.
At that point in time, it would signify a lower low, and that’s exactly what you want to see. If we do rally again, then we will probably test the top of the inverted hammer from the Thursday candlestick, and then possibly even as high as the 50-day EMA. As long as we stay below the 19 level, we are still technically in a downtrend, or we at least haven’t broken market structure. We’re still seeing lower highs.
Where Are We Going?
Ultimately though, where can we go? I suspect we’re probably going to work our way down to about 17.7 or so, although it will take some time. Keep in mind that the interest rate differential favors Mexico. And of course, recently we’ve seen the United States give Mexico a 90 day extension in the tariff negotiations due to the fact that on the whole, appears that the Mexicans are truly working with the Americans. And therefore, we don’t have to worry as much about the effects of US tariffs on the Mexican economy, at least not for three months.
The way the conversations have gone, it’s very likely that there will be some type of deal struck between the US and Mexico anyway. Contrast that with Canada, which is in a completely different set of circumstances with the Americans. And you can see why the Mexican peso has been one of the better performers against the US dollar, starting long before the Euro or the British pound started.
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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.