The USD/MXN is trading near the 17.52660 ratio as of this writing with fast conditions being observed as the week begins. The USD/MXN was near the 17.16000 mark at this time last week and then saw a vast amount of nervous sentiment generate a higher price as the USD got stronger across the board. Behavioral sentiment last week sparked a run toward risk-averse buying of U.S. Treasuries by financial institutions.
Speculators of the USD/MXN are likely looking at the results from last week with a very interesting perspective. The long-term trend of the USD/MXN has been downwards. Yes, reversals like last week’s jump higher certainly happen and traders cannot bet blindly on downside price action to always happen. The high of the USD/MXN last week occurred on Thursday when the currency pair hit the 17.70000 ratio. The last time the USD/MXN hit this mark was in early June.
Crude Oil Prices are High Again and this could affect the USD/MXN
The price of WTI Crude Oil as of this morning is near 87.00 USD. This is a high that was last seen in November 2022. The higher energy prices may spark speculative forces within the USD/MXN to bet on bearish momentum to develop.
However, traders need to understand that the direct correlation between the price of Crude Oil and the Mexican Peso is not always certain. There are too many other dynamics in the energy sector and Mexican export market for short-term traders to use the higher price of WTI Crude Oil as a guaranteed lynchpin. Nevertheless, the higher price for energy and a USD/MXN which is currently trading within the higher elements of its mid-term range is intriguing. On the negative side, traders should note as the price of Crude Oil surged higher last week the Mexican Peso lost value.
Support levels for the USD/MXN should be watched near the 17.50000 level. If this ratio below starts to get tested and not prove durable, traders could believe it is a signal that USD/MXN has been overbought in the past two weeks. Speculative positions which are seeking downwards momentum in the USD/MXN are likely being wagered on and financial institutions probably suspect this too, meaning near-term trading of the currency pair should be watched closely.
Current Behavioral Sentiment and U.S Inflation Reports Later this Week
- The USD/MXN will also react to inflation numbers via the U.S CPI and PPI reports later this week, meaning early trading this week could try to position their USD/MXN wagers before the inflation data is released.
- Price velocity in the USD/MXN last week was fast and there are plenty of reasons to suspect the currency pair will continue to be volatile today and the remainder of the week. Traders should use their risk management wisely.
USD/MXN Short Term Outlook:
Current Resistance: 17.56400
Current Support: 17.51100
High Target: 17.62200
Low Target: 17.46800
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