USD/MXN: Battling Critical Support Short Term

Robert Petrucci

The USD/MXN has continued to traverse near important support levels and has sustained its values at these crucial levels.

The USD/MXN has demonstrated the capability of holding onto its bearish momentum and battle important support levels.  With the target of 21.00000 clearly in view, speculators should understand this juncture is a key psychological inflection point. If the value is punctured lower it could set off a quick burst of trading downward which would test support levels that were touched in mid-September when the 20.83000 value was approached.

The question speculators need to ask is if there is enough risk appetite left in the gas tank of investors to challenge support levels below in the USD/MXN currently. Yes, the forex pair has experienced a significant bearish track mid-term and this may continue, but in the short term is it likely momentum will continue to warrant selling of the USD/MXN, or is a temporary reversal an avenue to pursue?

What the past couple of days of trading have shown speculators technically is that a cautious wind is starting to blow within forex.  The USD continues to show signs of weakness against other major and emerging market currencies, but a conservative approach has developed and trading ranges have become tighter with signs of small reversals.

Support is certainly being tested short term, however, and speculators may continue to believe the bearish side of potential trades carries the most favor with the USD/MXN. What may be a signal for sellers to continue their speculative bearish inclinations is that resistance up above has proven adequate. The level of 21.15000 appears to be a rather strong point and when touched yesterday caused another wave of selling to emerge within the USD/MXN. Traders may feel comfortable with the Mexican Peso because it has not shown a great deal of volatility the week.

However, as traders contemplate selling the USD/MXN they should also acknowledge that only a handful of days before, the forex pair was trading near the 21.50000 level then developed another it current near term bout of bearish momentum. The support level being tested by the USD/MXN has proven strong before and caused reversals higher, so this should be kept in mind.

Speculators cannot be faulted for wanting to test selling positions however with the belief the 21.0000 juncture appears vulnerable and ready to be punctured lower. If traders do decide to sell the USD/MXN they should use limit orders to cash out of winning positions quickly, because a sudden drop below the 21.0000 could spur on momentary reversals higher which may be unappealing to attempt riding out.

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Mexican Peso Short Term Outlook:

Current Resistance: 21.15000

Current Support: 21.02000

High Target: 21.29000

Low Target: 20.85000

USD/MXN

Robert Petrucci
Robert Petrucci has worked in the Forex, commodity, and financial profession since 1993. Important aspects of his work involve risk analysis and advisory services. As an advisor in a Family Office he maintains a conservative approach for wealth management and investments. Robert also works in private finance with investors and companies delivering financial and management services.

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