- The US dollar has rallied a bit during the trading session here on Friday as we are approaching the 18.50 pesos level. This is an area that previously had been support, so it does make a certain amount of sense that it ends up being resistant as market memory comes into the picture. The 50 day EMA is sitting right around that area as well. And of course we have a downtrend line. So, it all ties in together quite nicely to offer resistance. Because of this, I will be looking forward to seeing if we get signs of exhaustion because that would be probably one of the better signs that you can get.
- Although obviously nothing is 100 % accurate, it is an area that you would expect to see it. If we can break above the 18.8 level, which probably takes a couple of days’ worth of pressure, then the US dollar probably rallies quite significantly against the Mexican peso.
Dollar Strong Against Others
All of that being said, the US dollar is rallying against most currencies, but the Mexican pesos a little different because Mexico sends a huge portion of its exports into the United States and in fact is the largest exporter to the United States in the world. So therefore, the currency pair tends to move backwards from what you initially think if the economic situation in the United States is strong the dollar falls against the peso because the Americans are going to be buying more Mexican goods. If the economic situation in the United States is poor, people run to the US Treasury markets and pull money out of Mexico because it is so dependent on America for its exports. The US economy is relatively strong. So, I do favor shorting this pair, and you get paid to hold the peso. So, I'm looking for signs of exhaustion, maybe take advantage of that. I don't expect fireworks anytime soon though.
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