The USD/MXN pair initially fell during the course of the session on Tuesday, but as you can see bounced enough to form a bit of a hammer. Interestingly enough, this hammer sits on top of the up trending channel that we have been involved in for some time, and it now appears that we are breaking out to the upside. This is interesting, because the US dollar got beat up rather significantly during the session, and the Mexican peso is in exactly considered to be a place to run away from the US dollar to.
Ultimately, most traders look at the Mexican peso as a proxy for the oil markets, and as a result I think that perhaps the oil markets are going to soften again. The Gulf of Mexico is full of drilling rigs that are Mexican owned, and as a result the petroleum markets can greatly influence where the peso goes next.
Buying pullbacks
I believe in buying pullbacks overall in this pair, as corruption and economic struggles in Mexico should continue to propel the US dollar higher against its own currency. On top of that, I think that this market will continue this uptrend for some time, because there is really nothing out there to suggest that the Mexican economy is going to start getting better. After all, there are some serious fundamental flaws with the economics of Mexico, and as a result it makes sense that we continue to head towards the 18 handle.
Even if we do pullback from here, I see a massive amount of support all the way down to the 15.71 handle, which is quite a way from here. I think that oil markets look ready to break down again, although they did bounce slightly during the session on Tuesday. With this, as oil falls I believe that this pair will continue to rise as it typically does.
