The US dollar has initially tried to rally during the course of the trading session on Thursday before pulling back midday. This is most likely due to oil recovering, as the Mexican peso is highly sensitive to that commodity. Furthermore, interest rates will have their part of play, as Mexico has a significant advantage over the United States. That being said, this is a market that is also highly susceptible to risk appetite, so it will be interesting to see how this plays out.
The market has a significant uptrend line just below, and therefore we should see a certain amount of support at that point in time. Furthermore, we also have the 50 day EMA at the bottom of the candlestick from the trading session on Wednesday, so that should offer a significant amount of support. Underneath there, we also have the 200 day EMA which is sitting right at the uptrend line. Beyond that, the 50 day EMA has broken above the 200 day EMA to form a bit of a “golden cross”, which is a technical indicator that a lot of traders will pay close attention to from a longer-term standpoint.
The market structure continues to see “higher highs” and of course “higher lows.” Until we break down below the candlestick from the Tuesday, we are still in that structural frame of mind. On the other if we break above the highs of the trading session on Thursday, then it would be a very strong sign and send this market looking towards the 21 MXN level. A break above that level would kick off a longer-term “buy-and-hold” type of scenario. The US dollar has been rallying against almost every other currency, although Mexico is a bit different. That makes a certain amount of sense as we continue to see interest rates drive the US dollar back and forth. However, Mexico has an advantage in this scenario, so this is part of what has kept this market somewhat quiet in the face of the US dollar buying in other currency such as the Euro and the British pound. In general, this is a market that I still like buying dips, at least until we change structure, something that we are not going at the moment. With that in mind, the market will continue the overall grind.
