The USD/MXN rose during the course of the session on Wednesday, breaking above the 16.11 level. This coincides nicely with a significant breakdown in the oil markets, as we found ourselves trading below $50 for the first time in ages. With this, it makes sense if the Mexican peso should continue to break down overall, as the Mexican peso is highly influenced by all of the oil rigs in the Gulf of Mexico. Cheaper oil means less profits for Mexican oil drillers, and as a result less money and exports to their number one customer, the United States. In other words, this is a very clean way to play the petroleum markets if you have the ability to trade this pair.
Recently, you can see that we have been trading in a bit of a channel. We broke above that channel on Monday, and then Tuesday came back down to find enough support to bounce and form a hammer. The hammer of course is a very bullish sign and the fact that we broke above it is even more so.
Buying pullbacks and watching oil
I currently plan on buying pullbacks in this pair, and buying them with larger positions when I noticed that the WTI Crude Oil markets find themselves falling. The 2 should coincide overall, and when they do it is a bit of a “turbocharge” for this particular currency pair to the upside. I think that we will eventually head to much higher levels, and as a result I think that there is no way to sell this particular market. I believe this is going to be the case going forward, and with that being said it’s probably only a matter of time before we reach towards the 16.50 handle.
If we broke down below the 15.80 handle, I would have to consider sitting on the sidelines as the market at that point in time would be giving me quite a bit to think about. It would also have more weight as far as I am concerned if the oil markets suddenly found their footing. At this point in time though, I don’t anticipate seeing that.
