The USD/MXN is trading near important support levels and has been able to sustain its rather solid bearish trend which has developed since early August. Global risk appetite has been strong and this has been reflected within the USD/MXN which serves as an important barometer of sentiment. However, developing news that Hurricane Laura could have a large impact on the US Gulf Coast may create safe haven trading to emerge over the next two days.
Speculators should pay attention to the developing storm front and carefully consider the potential for volatility to ensue within the USD/MXN. There are some technical traders who disdain many forms of news and believe that charts are the only way forward to have pure success. However, nowadays even amongst the most hardcore technical traders, an acknowledgment that media hyperbole can shift the emotions of the trading landscape would likely be accepted.
Speculators should prepare themselves for the potential of volatile trading to emerge before going into the weekend. The trading range of the USD/MXN has been relatively tight this week after seeing a surge of selling emerge last Friday. The range of 21.87000 to 22.04000 has prevailed in the past few days. The ability of the Mexican Peso to create a sideways value band may have something to do with a rising sense of caution due to the potential implications of Hurricane Laura.
Yes, the USD/MXN has been within a solid bearish trend and support levels below near the 21.80000 level are enticing, and if broken lower could produce more tests downward for the forex pair. However, as every good forex trader knows, there is a big difference between short and long term trends and the results they are expected to produce. Solid risk management may prove a wise tool when trading the USD/MXN today and tomorrow. Yes, it is possible the hurricane will pass and not have much impact on overall market developments, but it is still important to practice caution.
Speculators with a taste for adventure may try to buy the USD/MXN if they believe risk appetite may be reduced the next couple of trading sessions as people take shelter from the approaching storm. Buying the USD/MXN within a price vicinity of 21.90000 to 21.95000 and looking for short term momentum to drift upwards may prove to be worthwhile.
Mexican Peso Short Term Outlook:
Current Resistance: 22.05000
Current Support: 21.87000
High Target: 22.19000
Low Target: 21.85000
