- The US dollar initially tried to rally against the Mexican peso, but then fell rather significantly to break back down below the 18 pesos level.
- The 50 day EMA sits just below current trading, right around the 17.75 level and is rising.
- I think that is an indicator that a lot of people will be paying attention to.
So, I do think that the US dollar is supported. That being said, there is an interest rate differential between the two currencies that cannot be ignored. After all, the US dollar pays a decent amount of interest, but the Mexican peso is roughly twice as much or just a touch under. So, with that being said, it's difficult to buy and hold this pair unless there is a major risk of issue out there.
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Short Term Weakness? Or More?
That could be the case, but right now it looks like the US dollar is slipping a bit. And I think we're trying to find a new trading range. After all, this USD/MXN pair does tend to trade in a range over the longer term, followed by huge moves in one direction or the other, because it's not necessarily the most liquid pair out there. Remember, almost all of the major trading is done during North American hours. So, it's a very regional setup.
If we can turn around and take out the 18.10 level, then I think the US dollar goes look into the 18.50 level. On the other hand, if we take out the 17.55 level underneath, that could open up a significant amount of selling. In general, this is a situation where I think you're going to see a lot of choppiness and perhaps indecision. Because of this, I’d be very cautious about putting a ton of money in this market, but i also recognize that it does tend to favor the risk appetite traders in general, as the Mexican peso is a referendum on Latin America, and of course emerging market currencies as well.
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