The US dollar initially tried to rally against the Mexican peso during the trading session on Monday, as we initially had seen greenback strength. However, a little later on we started to see the US dollar loses strength in general. This of course was no different against the Mexican peso as people started to take on more risk. This pushed the USD/MXN para below the 19 pesos level, which of course is a large, round, psychologically significant figure in the scene of somewhat significant support previously.
Looking at the chart, you can see that we are starting to test a major support level, and one thing that will be interesting is that we made a “lower low”, before bouncing recently towards the 19.50 pesos level, where we rolled over again and broke down below the 19 pesos level. The question now is whether or not we are going to make another “lower low?” If we were to break down below the 18.75 pesos level, that could be the beginning of a major move lower. The initial target would be the 18.50 pesos level, as it has seen some action in the past.
The alternate scenario of course is that we turn around and use the 19 pesos level as a springboard. If we do, then I think we are going to tighten up and start to consolidate even more between the 19 and the 19.50 pesos region. That is my base case, but at this point I’m also very much aware of the fact that the lower low could happen. If it does, then I would become aggressively short of this market, assuming that the oil market shows higher pricing as well, as it could have money flowing into the peso for that reason also. Above the candle stick for the Monday session I assume we go back and forth in the previous mentioned consolidation area, if we break down though, that could lead to a bigger trade.
