The USD/MXN has climbed from a low of nearly 19.86000 on the 28th of April to highs of approximately 20.30000 the last couple of days. The one-week bullish trend is now within sight of highs seen in the first week of April, which reached the 1.203700 mark. Traders are now faced with a decision regarding direction.
Getting right to the point, from a risk/reward technical scenario, it appears there is more room for downside momentum to emerge. Yes, the USD/MXN could certainly continue to climb upwards; on the 24th of March, the Forex pair was trading near 20.94000, and on the 8th of March the pair hovered close to the 21.55000 juncture. So why should traders believe the downside has the greater chance to see productive results?
Trading certainly consists of cycles which often demonstrate reversals, but the long-term trend of the USD/MXN can still be interpreted as bearish. The moves higher in the past week within the USD/MXN may be a natural reaction to important support levels being tested. The notion that the USD/MXN may be overbought and resistance levels will prove to be durable short term may look attractive to speculators who believe the Forex pair may be ready to run out of upward energy.
The 20.30000 resistance level can be used as an important inflection zone by technical traders. If trading is sustained above this level for a solid amount of time, yes, it could signal that additional buying power may develop within the USD/MXN. But if the resistance level proves durable, the values of 20.24000 to 20.29000 could produce intriguing selling opportunities.
The USD/MXN has certainly been within a short-term bullish trend, and wagering against the move higher may be a contrarian perspective. However, if speculators take into consideration that only one week ago the USD/MXN was trading below the 20.00000 with relative comfort, the notion that lower values can be attained again near term may be rather appealing. Stop-loss orders are recommended if a trader decides to pursue a selling position to guard against resistance levels crumbling, but going short the USD/MXM may be a worthwhile wager to speculate.
Mexican Peso Short-Term Outlook:
Current Resistance: 20.29000
Current Support: 20.17000
High Target: 20.37000
Low Target: 19.97000
