- The US dollar initially shot higher against the Mexican peso during trading on Friday, reaching towards the 18.60 level.
- However, the market has since given up the significant bullish pressure, and it looks like we are starting to run into a little bit of exhaustion.
- This does make quite a bit of sense, given the fact that the momentum has the USD/MXN pair far too overstretched, and at this point in time I think it makes sense that we will see a little bit of a pullback.
The 18 level underneath is an area that will probably have a significant amount of psychological attachment to it, and therefore it would not surprise me at all to see a little bit of support. If we were to breakdown below that level, then we could be looking at a 17.60 battle ground.
Buying on pullbacks
The market is setting up for an opportunity to start buying on short term pullbacks. Ultimately, this is a market that I think continues to see a lot of noisy behavior, as the market is starting to see quite a bit of volatility coming into the picture. Keep in mind that there are a lot of concerns coming out of Mexico now, most of which are political. After all, they are now talking about having voters come in and vote for Supreme Court justice positions. Because of this, there's a lot of uncertainty about how the Mexican economy is going to function. Furthermore, you also have to keep in mind that if the United States starts to slow down, then it's possible that the markets may punish Mexico as the Mexican economy is so highly sensitive to the U.S. economy.
The market shot straight up in the air, and therefore this exhaustion is not a huge surprise. I do know that the 16 level underneath was a massive floor going back several years so a little bit of a recovery wasn't much of a surprise. At this point, if we can take out the 19 level to the upside, then we could go much higher.
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