Proving that risk-averse trading can cause spikes higher, the USD/MXN surged early this week, but the Forex pair has reversed lower now.
On early Monday, the USD/MXN produced a fear-induced spike higher as developing news regarding coronavirus caused momentary bedlam for many Forex pairs. After hitting a high of 20.66000, however, the USD/MXN has exhibited a rather steady pace downwards and begun to flirt with important support levels which make it attractive for speculators to contemplate.
The USD/MXN has enjoyed a solid bearish trend and the month of December has seen values tested below not traversed robustly since early March of 2020. Following the spike higher early this week and reversal lower, the USD/MXN is still perched higher than its values traded only five days ago. Technically, the Forex pair appears to have vulnerable support levels, and traders cannot be faulted for thinking the 20.00000 is once again a nearby target.
The holiday season has started to produce lighter trading volumes. The ability of the USD/MXN to descend to a known range, while not recapturing technical low water marks seen recently, makes the pair a worthwhile consideration. The overall weakness of the USD in Forex and the ability of global markets to maintain a rather steady amount of risk appetite have been on exhibit for a while.
This week’s early bout of fear regarding the newly found variant of coronavirus has sparked concerns, but global markets seem to have stabilized. Trading the next couple of weeks could produce choppy waters because of a lack of transactional volume from financial institutions, but the trend of the USD/MXN has demonstrated an ability to remain bearish.
If the 20.00000 support level falters, it could set off a rapid test of lows seen last week. Speculators do need to understand that swift movements may not occur as anticipated because of the holiday season, but if they are able to practice patience and use resistance levels above as stop loss ratios, pursuing further bearish movement from the USD/MXN seems to be the logical decision.
Traders may be able to use rather tight limit orders with the USD/MXN short term if lighter volumes produce tranquil ranges. However, speculators should keep their eyes on Forex when participating the next few days, because there is the potential for holiday spikes to suddenly emerge without notice. The bearish trend of the USD/MXN may produce advantages for traders using limit orders if they are positioned correctly and sell the Forex pair after slight reversals higher have taken place.
Mexican Peso Short-Term Outlook:
- Current Resistance: 20.14000
- Current Support: 19.99000
- High Target: 20.23000
- Low Target: 19.90000