The USD/MXN broke through the 21.50000 support level yesterday and it set off another bearish leg lower. The Mexican Peso is now testing values it traversed briefly in early June before it experienced a sharp bullish reversal upwards. The question speculators now need to answer is if the USD/MXN will be able to break the critical support level it is now testing or if another reversal higher will resume?
Traders need to remember although Mexico is in the midst of battling economic implications due to coronavirus that the movements of the USD/MXN are not only affected by its domestic concerns. The USD has been weakened by the US Federal Reserve, and this has helped create a foundation of strength for the Mexican Peso when it is being traded versus the US Dollar. This means that sellers of the USD/MXN do not necessarily have to believe that the Mexican Peso is generating its own strength, speculators simply need to track its momentum and take advantage of its trend.
The 21.40000 level for the Mexican Peso is critical for traders as a support level to watch. In early trading this morning the USD/MXN is traversing slightly above this level, but if the 21.40000 support ratio falters and trading can be sustained below it will likely begin to engage institutional trading programs that clearly see this value range has not seen a legitimate test mid-March.
Speculators who believe the USD/MXN will enjoy further bearish momentum should use their stop losses wisely. Encouragingly, resistance levels for the USD/MXN have been incrementally decreasing as bearish momentum has continued to develop since early August for the forex pair. Certainly, the USD/MXN could see a reversal upwards, but resistance may prove capable near the 21.80000 level. The USD/MXN is susceptible to volatility and because the forex pair is testing important support levels, traders should be prepared for sudden moves.
Traders who want to pursue the bearish trend of the USD/MXN should consider selling within the 21.50000 to 21.45000 levels with limit orders. Momentum appears to favor traders who continue to believe risk appetite will remain steady in the global markets. Risk reward scenarios are tricky to forecast as the USD/MXN trades near support it has not been able to puncture lower mid-term, but the trend may favor those who are brave and speculate with short term selling positions.
Mexican Peso Short Term Outlook:
Current Resistance: 21.80000
Current Support: 21.40000
High Target: 21.90000
Low Target: 21.20000
