USD/MXN
The US dollar was very choppy during trading on Monday as traders came back to work. This of course was the same against the Mexican peso as it was many other currencies, and this makes a lot of sense as most people use the Mexican peso as a bit of a proxy for the crude oil markets. We are currently in a rising wedge pattern, which typically can be thought of as bearish, but we do not have the break down yet to confirm this. Until that happens, one must simply believe that there are still buyers on dips. Keep in mind that oil is trying to form a bit of a bottom, at the $50 level in the WTI grade. I look at the 20.50 level in the USD/MXN pair as essentially the same thing as the $50 level in the WTI market. In other words, if we break down below the $50 level, then I think the US dollar will skyrocket against the Mexican peso. This is because of the oil correlation, perhaps also a move into safety as it would probably have a lot to do with global demand and perhaps a slowdown.
If we do break down below the uptrend line, I think the initial target will be the 20.00 level, and then if we can break down below there, and of sensibly the 50 day EMA, we could go as low as 19.70 after that. I do believe that the market looks as if it is getting a bit exhausted, so I think we are much more likely to see a bit of a pullback than a breakout. However, with all of the volatility in the global market you should be very cautious.
