The US dollar initially fell a bit during the trading session only to turn around and show signs of life. We have broken significantly above the 50 day EMA which of course is a technical indicator that a lot of people like to follow and because of this I do think there's a certain amount of buyers that will be paying close attention to not only that but the fact that we are between that and the 200-day EMA. The 200-day EMA is near the 17.15 level and dropping so I do think that causes a little bit of a short-term ceiling. Keep in mind that interest rate differential definitely favors Mexico and I think that continues to be a situation that will perhaps push this market lower.
Exhaustion is Something I am Watching For
Signs of exhaustion after this rally are selling opportunities, but I think they're short term, mainly due to the fact that we have so much support underneath, extending all the way down to the 16 paces level, which is historically crucial. Because of this, I think we are trying to sort out whether or not the market is going to bounce from this historically important level or if it's going to break through.
It is worth noting that Mexico is now the largest exporter to the United States. So, the dynamism of this market has changed a little bit, but regardless, it's still in a downtrend. So, I'll be looking for signs of exhaustion to start selling, but I think it's a short-term opportunity, not necessarily a longer-term one. Furthermore, you should keep in mind that this is a market that has a very wide spread at times, so it is worth being cognizant of the fact that you need enough room to make a reasonable profit.
It’s also something that is noting is that you do get paid at the end of every day to own the Mexican peso, so therefore you are essentially “swimming upstream” if you are looking to buy this pair, unless there is some type of major “risk off” type of scenario, which of course is possible due to all of the geopolitical noise out there.