- The US dollar has rallied a bit against the Mexican peso, as we continue to see a lot of noisy behavior and we have a situation where this is a market that might need to correct a bit as we had fallen rather significantly.
- If we can break above that trend line, then it’s very possible that we could go looking to the 19.4 MXN level, where the 50 Day EMA currently resides.
- Any rally at this point in time will probably end up being a selling opportunity, but if we get a major “risk off move”, then we could see the US dollar really take off as it is considered to be a major “safety currency.”
US/Mexico Symbiotic Relationship
Keep in mind that the better that the Americans are doing, typically, the Mexican peso will strengthen, as Mexico sends so much in the way of exports into the United States, so you have to think of the United States as “Mexico’s biggest customer.” That being said, in times of fear, the US dollar trumps just about everything that you can put money into, including the Mexican peso. Furthermore, if the US economy starts to slump, that also can work against the Mexican peso as manufacturers will not be selling as much into America.
If we break down below the 18.80 MXN level, then I think we have a situation where the US dollar will drop toward the 18.50 MXN level. All things being equal, this is a market that I think still favors the downside as things stand right now, but I also recognize that it’s been a one-way trade for a while and that’s not something that lasts forever. Keep in mind that you get paid to go short in this market, but the oversold condition could be much more at the forefront at this point.
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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.