After touching support near the 22.1500 level only two days ago, the USD/MXN has developed a reversal higher. The past month of trading for the Mexican Peso has been relatively tranquil in a steady range between 21.6500 and 22.8000. However, since the last week in June, the Mexican Peso has started to accumulate higher short term support levels, which indicates bullish sentiment might develop as risk appetite decreases.
Coronavirus statistics are not making things easy for the Mexican government and economic concerns for the nation are weighing on sentiment. The USD/MXN however is also easily influenced by economic sentiment regarding its largest trading partner, the United States. The US Dollar while having lost some ground to major currencies in forex the past few days has begun to show increment buying surges as cautious trading has ebbed back into the marketplace, but is this only a temporary setback?
The question is how long will cautious sentiment prevail in the major equity indices? The USD/MXN is an excellent barometer of risk appetite short term. After achieving values of 21.4000 in early June, the USD/MXN has seen a bullish reversal. The Mexican Peso is not far from these better June values. Traders who gauge upside and downside risk in forex pairs constantly ask themselves where the least amount of speculative risk is situated. If risk appetite ignites again the USD/MXN could resume a bearish trend easily.
The current price levels of the USD/MXN suggest the possibility the short term bullish trend may run out of steam soon. Resistance near the 23.1500 juncture appears to be strong and if a trader has an opportunity to use this juncture as a stop loss while effectively managing the amount of leverage they are using, the belief that selling the USD/MXN at its current price values within the vicinity of 23.6500 to 23.8000 could prove enticing.
The USD/MXN for all of its known volatility has actually been a fairly comfortable trading opportunity the past month. A range between 21.4000 and 23.000 has provided the chance to test this consolidation by pursuing technical short term trends. The USD/MXN reflects global sentiment particularly well when trying to decipher risk appetite. The cautious mood in the marketplace may allow speculators to suspect the calm range of the USD/MXN offers a short term selling opportunity.
Mexican Peso Short Term Outlook:
Current Resistance: 23.0000
Current Support: 22.4000
High Target: 23.2000
Low Target: 22.1000
