- The US dollar has gone back and forth during trading on Wednesday as we continue to hang around the 19.78 level.
- This is a market that of course is watching the 20 level very closely as it is a large round psychologically significant figure and of course, an area that has seen a lot of selling pressure previously.
With this being the case, I think you've got a situation where traders are going to continue to look at this through the potential buy on the dip type of scenario. And with this being a market that is stretched the way it is, we'll just have to wait and see. I do see support at the 19.60 level, and then again at lower levels in the form of 19, where the 50 day EMA is currently hanging about. With all of this being the case, it looks to me like the market is probably going to continue to be a value hunting type of proposition as although Mexico is definitely benefiting from us strength or weakness.
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This Pair Moves Counterintuitively for Some
The ironic thing is that as the US starts to soften more, it'll bring more US dollars back into the United States. And therefore, this is a market that will actually rise with US weakness. Keep in mind that Mexico is the number one exporter to the United States now, and that has a direct correlation as to how things trade. If the US is doing quite well, it helps the Mexican peso because Mexico makes so much money off the US, and of course, the interest rate differential most certainly favors the peso. All things being equal, this is a market that looks very bullish, but I also believe it looks very choppy, so trade accordingly, and make sure your position size is reasonable as this pair can move quite rapidly at times.
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