The USD/MXN demonstrated more downside price action as the forex pair hit important support before going into the weekend. Sustained selling within the USD/MXN challenged the 20.85000 juncture on Friday, which is viewed as an important inflection point. This value was also tested on the 18th of September, and then caused a strong reversal higher which traversed upwards to the 22.70000 mark on the 24th of September, which subsequently set up the bearish trend the USD/MXN is still experiencing.
Mid-term price action within the USD/MXN has also enjoyed a bearish trend which reflects the overall results in forex as the USD has lost value against many currencies. This has happened as the US Federal Reserve has become extremely dovish and helped fuel an economic policy which seeks to create stimulus to battle the economic implications caused by coronavirus.
The bearish momentum seen within the USD/MXN has also continued the past week even as equity indices have begun to prove cautious globally. US equity indices continue to hover near important highs, but they have not been able to sustain strong bullish momentum. This tone in sentiment illustrates the bearish trend in the USD/MXN may not be finished and more downward price action could develop.
Support near the 20.92000 level may prove to be important, but what speculators will want to keep their eyes on is the 20.85000 juncture. If this lower target falters it could set up volatile market action if trading can be sustained below this level. The last time the price of the USD/MXN traded below the 20.85000 value was in the second week of March when coronavirus concerns started to implode within the financial markets.
Selling the USD/MXN may feel like a risky trade to speculators because it is hovering near important resistance and the temptation may be to look for reversals higher. This decision cannot be faulted and might be considered the cautious approach while speculating on the forex pair.
However, speculators who want to pursue selling positions may have market sentiment on their side, and if they choose to take bearish positions using limit orders slightly above the current market price of 20.99000 this may be considered a solid trading opportunity. Looking to take advantage of slight reversals higher and then pursuing more downward action from the USD/MXN near term continues to look like an intriguing speculative trade.
Mexican Peso Short Term Outlook:
Current Resistance: 21.04000
Current Support: 20.92500
High Target: 21.09000
Low Target: 20.85000
