At this point, the US dollar is falling again against the Mexican peso, in a sign of major US dollar depreciation. The 19.50 peso level is a major support barrier for this market, and it certainly looks as if we are trying to break down below it. The 50 day EMA does sit just above, sitting at the 20 pesos level. The 50 day EMA is arching lower, and of course has been important more than once for this market.
Keep in mind that the market has been in a downtrend for several months, as the US dollar continues to get beat up on by the Federal Reserve and its loose monetary policy. At the same time, if inflation is going to start picking up, it probably works against the US dollar in general, as there will be a huge push towards commodities, and while Mexico is not a major commodity producer overall, there will certainly be a push towards crude oil. Crude oil of course is produced in the Gulf of Mexico, and some of those rigs are Mexican.
As the crude oil markets continue to show strength, it is very possible that we could break down, but I think that the 19.50 pesos level continues to be very important. If we break down below that level, then the Mexican peso has a tendency to move in 0.50 pesos increments. Because of this, I would be looking towards the 19 pesos level, and then perhaps as low as the 18 pesos level based upon longer-term technical analysis.
If we do turn around a break above the 50 day EMA, then we have to deal with the 200 day EMA which is currently just below the 20.50 pesos level. The 50 day EMA of course sits at roughly 20 pesos, and that is a fairly significant headline number that a lot of people would pay close attention to. Regardless, this is a market that is very much in a downtrend and unless we start to see crude oil get hit or at the very least US dollar buying strengthening worldwide, I just do not see how this pair rallies. Keep in mind that this pair tends to grind for long periods of time, so keep in mind that a turnaround in the trend is going to be something very difficult to happen.