Economic data from Mexico continues to deliver troubling statistics; the latest manufacturing numbers have produced another decline in factory orders and seen evidence of additional layoffs in the workforce. Coronavirus and its implications on Mexico are putting the government in a difficult position as it tries to keep its citizens from growing disgruntled.
However, in the midst of these economic hardships, the USD/MXN has demonstrated a fairly remarkable bearish trend since late June. On the 30th of June, the USD/MXN was trading near 23.22000 and this stands in sharp contrast to present values. Trading this morning has seen the USD/MXN moving within a range of nearly 21.70000 and 21.80000.
Interestingly, the 21.70000 continues to look vulnerable as the USD/MXN sustains its low watermarks. Speculators should be watching this price level carefully because if support falters in this area the 21.60000 level could be tested rapidly which would mean the forex pair may begin to test early June values. On the 8th of June, the USD/MXN was trading at the 21.45000 juncture before a bullish reversal ignited and developed higher values until it ran out of steam later that month.
Speculators need to understand the USD/MXN is a rather intriguing barometer of global risk appetite. The Mexican economy is the second biggest economy in Latin America and its proximity to the United States makes it an accurate reflection of investor sentiment many times. While US equity indices have soared to higher territories and are testing historical values, Mexican equities have not been as positive and in fact, have shown signs of struggling. The lack of a correlation between equities and forex is interesting for the USD/MXN; however, it highlights another factor which has helped create bearish momentum within the forex pair: the USD has become weaker because of US Federal Reserve policy.
While the USD/MXN trades near important technical resistance, speculators may not be as tempted to try and sell. However, the trend has been rather steady and more bearish activity may develop for the USD/MXN near term. Selling the USD/MXN within a range of 21.80000 to 21.9000 via limit orders may prove to a short term position that can produce results to the downside.
Mexican Peso Short Term Outlook:
Current Resistance: 21.95000
Current Support: 21.68000
High Target: 22.10000
Low Target: 21.50000
