The USD/MXN busted through resistance levels again on Monday, but as of this morning the trading range has developed a narrow band and some slight selling has emerged. After developing a polite bearish trend most of July, the USD/MXN has reversed and begun to see an increase in buying of the US Dollar. However, a three-day trend in the forex market does not mean a one-way street is going to develop endlessly for traders.
The USD continues to exhibit signs of weakness overall in forex and the Mexican Peso may be able to feast upon the notion more bearishness via the Dollar will emerge mid-term. The past few days of trading have certainly seen buying for the USD/MXN, but can it be sustained? Risk appetite in the global equities markets seems to be waiting for its next cue and the past week has produced mixed results. The question is where the next strong dose of momentum will come from?
Short term the USD/MXN is near important resistance levels and the 22.70000 could prove crucial. If the 22.70000 goes untested today and tomorrow, it might allow speculators to believe another bearish trend will develop for the USD/MXN. If the 22.70000 falters and higher values near the 22.85000 juncture begin to look vulnerable, traders may suspect further bullish action for the USD/MXN will be seen.
The USD/MXN is within an opportunistic range for technical speculators. The past three trading sessions have certainly seen a bullish trend emerge and resistance levels have proven weak. Current support near the 22.45000 level should be watched. If this mark is broken lower, it may signal the USD/MXN may begin to re-engage a bearish trajectory and test values around the 22.25000 juncture. It should be noted that after hitting the 21.85000 mark in the middle of last week, the USD/MXN has developed its bullish trend.
The recent bullish trend of the USD/MXN should be viewed skeptically in my opinion. Again, this isn’t about the Mexican Peso being a favorite currency, it is about the relative value of the US Dollar and the notion the USD/MXN may resume its bearish trend and follow in the footstep of the forex market which has seen emerging market currencies gain over the past few weeks.
Mexican Peso Short Term Outlook:
Current Resistance: 22.70000
Current Support: 22.45000
High Target: 22.85000
Low Target: 22.25000
