The bearish trend of the Mexican Peso has resumed in full force the past day and a half of trading for the USD/MXN. As expected nervousness and risk-averse trading saw a short term bullish trend emerge on Thursday as Hurricane Laura pounded the Gulf Coast. However, as the storm diminished and traders examined the impact from the strong rains, a surge of flooding, and damaging winds, most understood the financial markets would survive and perhaps even thrive.
The past day and a half of trading has produced more selling of the USD/MXN and the forex pair is now testing values it has not traversed since early June. Mexico continues to publish less than inspiring statistics about coronavirus and the devastation it has caused for many citizens within the nation. However, global risk appetite remains a focal point for the USD/MXN like many other forex pairs.
Important support levels are once again in focus for the USD/MXN and speculators who look at mid-term charts will see the current price action is testing important psychological and technical junctures. If the USD/MXN can mount more downwards momentum and break through the 21.69000 it could create a target of 21.60000. However, traders should also acknowledge the price range of the USD/MXN has experienced strong reversals higher since mid-June when support levels around the 21.80000 mark were approached.
This brings up a question about risk appetite. The USD/MXN did trade in a rather sideways manner yesterday after resuming its bearish trend on Friday but did produce incremental downward selling. This occurred as investors seemingly took a breather to look at the values of global equity indices and try to find a resting spot. Mexican corporate shares also traded slightly negative yesterday. However, ‘slightly’ is the keyword. A violent selloff was not experienced, which means many investors and financial institutions continue to hold onto their assets and pursue more risk in the coming days.
Selling the USD/MXN may be the logical choice in order to pursue what appears to be a resilient risk appetite. Traders should use limit orders and target selling positions above the current price range, meaning they might want to wait for a slight reversal higher, perhaps the 21.88000 to 21.93000 level could be appropriate to enter a short order. Resistance near the 21.98000 could provide some ability as a protective stop-loss if a speculator decides to sell the USD/MXN short term.
Mexican Peso Short Term Outlook:
Current Resistance: 21.98000
Current Support: 21.73000
High Target: 22.10000
Low Target: 21.60000
