The past two days of trading have seen the USD/MXN begin to incrementally decline. Both support and resistance levels have decreased in the past two days, which may indicate that the short-term bullish momentum experienced within the USD/MXN the past few weeks may be running out of power.
The move higher within the USD/MXN certainly caused pain for speculators if they have been constantly chasing long-term technical bearish sentiment. However, the past two days have delivered declines off highs which produced a test of the 21.63000 level briefly on Monday. This week’s early high water mark tested prices not seen since November of 2020. Intriguingly, the move higher last November also developed via a sudden spike, after which it produced lows near the 20.20000 juncture only two days later.
What should interest technical traders who like a bit of fundamental knowledge is that early November’s price action happened during the US election which affected global Forex. Intriguingly, the move higher the past couple of weeks have come on the heels of extreme volatility in the US government bond sector, which has also affected Forex and the USD/MXN.
The ability of the USD/MXN to keep its resistance levels adequate the past couple of days and not burst higher may convince speculators that another leg down can develop. Traders with a long-term technical perspective who like to make short-term wagers may believe that the current values of the USD/MXN suggest that further downside momentum may pick up additional firepower.
The USD/MXN has been within a long-term bearish trend and, if current resistance levels over the next week continue to demonstrate an ability to not be punctured higher, speculators may want to use the current price levels as an opportunity to sell the Forex pair. Global risk appetite is certainly a bit nervous, but it has exhibited enough strength to keep many important global equity indices within eye contact of record highs.
Traders may want to use current resistance junctures as a cautious tactic to sell the USD/MXN and pursue support levels as take-profit targets. If support of 21.17000 is punctured, this could set off swift downward momentum, which could create a prompt test of lower values seen the middle of last week.
Mexican Peso Short-Term Outlook:
Current Resistance: 21.35000
Current Support: 21.17000
High Target: 21.45000
Low Target: 21.05000
