The USD/MXN is traversing within the middle ground of its one-month charts and short-term traders need to be careful.
The USD/MXN is hovering within a rather challenging value band as of this morning. After moving towards a low of 20.28000 last week, the USD/MXN has seen a reversal higher develop and, in early trading today, the Forex pair challenged the 20.84000 level which is acting as key resistance the past couple of weeks.
The USD/MXN remains technically within a long-term bearish trend, but its trading the past month has produced choppy conditions with moves higher on occasion. Although the USD/MXN was able to come within sight of one-month lows last week, the Forex pair was not able to sustain its momentum. Interestingly, after moving slightly lower yesterday and towards the 20.56000 mark, the USD/MXN resumed an upward climb.
The USD/MXN has always relied heavily on behavioral sentiment and is a solid barometer of global risk appetite because of its proximity to the US markets. Future calls on US equity indices are currently showing that there will be a negative opening. However, US stock exchanges continue to trade within sight of record highs which highlights the current sentiment may be risk-averse, but a steep and sustained sell-off has not occurred.
Traders technically may believe that the short-term momentum within the USD/MXN may have seen its strongest bullish reaction late yesterday. This may explain why the USD/MXN was able to reverse lower when it hit resistance levels near the 20.84000 after investors digested what may have been the worst of their sentiment via the US markets. However, with cautious trading still looking as if it may produce turbulent conditions today, traders need to be careful because technically conditions remain difficult.
In late February and through the 9th of March, the USD/MXN did show the capability of trading above the 21.00000 level as risk sentiment in the global markets produced nervousness due to a surge of volatility in US bond markets. Some of those same fears remain within the marketplace today as investment houses try to decipher their outlook as talk about two large additional US stimulus bills are being discussed by the White House and Congress.
Traders should use limit orders today to protect against volatility. If risk appetite continues to be in short supply today, speculators may want to be buyers of the USD/MXN and target resistance levels above. Buying the USD/MXN near support levels and looking for upward momentum short term may prove to be worthwhile short term.
Mexican Peso Short-Term Outlook:
Current Resistance: 20.82000
Current Support: 20.59000
High Target: 21.07000
Low Target: 20.44000