USD/MXN Formed a Hammer - 6 May 2016

During the session on Friday, we get the Nonfarm Payroll Numbers out of the United States, so that of course will have a significant effect on what goes on with the US dollar. However, when trading the US dollar against the Mexican peso, you have to keep in mind several other things at the same time. For example, the first thing that comes to mind is how traders feel about taking on risk. After all, the Mexican peso is most certainly a bit of an exotic currency, so it doesn’t tend to attract money unless the economic situation is good.

Oil

Keep in mind that the Mexican peso is quite often traded in congruence with oil, as the Mexicans produce so much of that commodity. Most of the oil rigs in the Gulf of Mexico are actually Mexican, and as a result it has a massive effect on this particular currency. This is especially true considering how it is a fairly exotic currency pair, meaning that the volatility and more importantly the volume is sporadic. However, this is an excellent market to trade longer-term typically, because it does tend to follow trends for so long.

At this point in time, you can see that we had tried to fall during the course of the session on Thursday, but turn right back around to form a hammer. The hammer is on the top of a move to the upside of consolidation, and as a result I think that this market is trying to break out. If we can get above the 18 handle, that could be a nice longer-term “buy-and-hold” signal. Also, on the chart you can see the 200 day exponential moving average is just below the bottom of the consolidation area, so at this point in time I am watching oil, and of course this chart. If oil falls, and we break above the 18 level in this market, I have no trouble whatsoever in buying.

USDMXN

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.