Potential Signal:
I am bullish in this pair. I am looking for a dip to the 19.33 level to buy based on “value.” I would have a stop loss at 18.90 MNX and be aiming for a move to the 20 MXN.
- In my daily analysis of exotic currency pairs, the USD/MXN pair is one that has caught my attention, because we saw a big push higher right away in the early hours of Tuesday.
- At this point in time, it’s also worth noting that the 50 Day EMA has seemed to hold a certain amount of support for the market, so I think you’ve got a situation where traders continue to find value in the short-term pullbacks.
- The market continues to look to the upside from everything that I can see, and therefore think you have got a situation where traders are keeping their eye on the 20 MXN level.
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Technical Analysis
The technical analysis for this pair is rather bullish, as previously mentioned, the 50 Day EMA has offered a significant amount of support. Furthermore, we are above the 19.50 MXN level, and therefore it looks like we are going to continue to stretch to the upside. Underneath, we have the 19 MXN level offering a significant amount of support, and therefore although I recognize that the market is probably going to continue to go back and forth in this 1 Peso range, the reality is that the overall attitude of the market is most certainly bullish, and of course we have seen that play out multiple times on each dip.
That being said, you also have to keep in mind that the market is highly sensitive to risk appetite and of course the US economy itself. A bit counterintuitively, if the US economy starts to slip, that will actually make the US dollar stronger against the Mexican peso, but if you understand the dynamics, it makes quite a bit more sense. Remember, Mexico is the largest exporter to the United States, so it’s the same thing as having a business that sees its biggest customer struggle. If the US economy starts to slow down, they will buy less Mexican goods, and therefore there will be less demand for the Mexican peso.
Furthermore, if traders start to focus on protection, they typically will go into the US Treasury market, which drives of demand for the US dollar. Beyond that, there are also remittances from migrants that will dry up as they are not heading back down to Mexico to help with families.
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