The USD/MXN pair is one that many of you probably don't follow, and therefore miss out on an excellent commodity currency to trade. A Mexican peso is highly leveraged to the oil market most of the time, and as a result it takes advantage of the fact that Mexico drills so much crude oil out of the Gulf of Mexico and exports into the United States. Also, it should be noted that Mexico is an up-and-coming economy that many United States based corporations have a lot of interest in. So when times are good, money flows into Mexico.
Another thing that shouldn't be overlooked as a driver in the Mexican peso is the fact that so many immigrants come into the United States and send money back into Mexico. When the economy is doing well the United States, this will often attract migrant workers into America, and they of course send large amounts of money back into Mexico, effectively shorting this pair.
Double bottom?
During the Wednesday session, we saw a nice looking hammer at the 12.68 level, an area that had seen support more than once. Presently, the MACD indicator shows signs of the virgins, which could mean that a bounce is coming.
The action on Thursday was fairly strong, and we continue higher up past the 12.82 handle. Because of this, it does look like there is going to be a serious fight to get below the 12.68 handle in this market. This allows me to have a "line in the sand" when it comes to this currency pair, and I know that I can start to sell aggressively if we get below that level. Otherwise, this pair does look like it wants to bounce quite a bit.
If you pull of the light sweet crude futures chart, you will notice that looks very similar to this currency pair. Most traders don't understand this, but the Mexican peso behaves to oil very similar as the Australian dollar behaves to gold. You would be well advised to take a look at this pair, and know that it does well when things are going well in America, or the oil markets. The spread is a little bit higher than you're used to, but the pip value is very low. With that in mind, it trade like any other currency pair.
Currently I think the bullishness will continue for the short run, and definitely will if the so-called "fiscal cliff" is resolved in the United States as it should allow for less of a burden on the economy, and therefore should continue to make things move forward in America.