- The US dollar has rallied rather significantly during the course of the session on Friday against the Mexican peso after the jobs number in the United States came out much weaker than anticipated.
- While at first the beginning retail trader may not understand why the US dollar rallied, the reality is that the Mexican economy is almost solely dependent on the US economy.
- Therefore, if the US economy struggles, the Mexican economy really falters.
So, at this point in time, we have seen the US dollar break the 19 pesos level, and that, of course, is a major turn of events. If we can continue to see a little bit of upward momentum, it would not surprise me at all to see the greenback trade all the way to the 20 pesos level.
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Buying the Dips
Short-term pullbacks continue to be buying opportunities with multiple areas underneath offering support. Now that we have broken out above the recent swing high, it makes quite a bit of sense that we could continue to see a lot of follow-through. This will be especially true if we continue to see stocks in the United States fall apart because that shows you what the risk weak risk appetite. Traders are not going to be looking towards emerging market currencies such as the Mexican peso. In fact, we've seen the US dollar strengthen against several other emerging market currencies that I follow, so none of this should be a surprise. At this point, I have no interest in trying to get short of this market as this impulsive move has been rather brutal.
With that being the situation it's almost impossible to imagine a scenario where this market doesn't have some follow through with bullish pressure. This is a market that does tend to be very impulsive over the occasional move like we just had, and therefore I think you need to understand that although it is choppy, we have certainly seen a major shift in attitude.
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