The USD/MXN continues to trend lower and as of this morning the currency pair is near the 18.18800 ratio depending on the bids and asks coming in rather fast paced.
Technical traders certainly can see a trend lower magnified in the USD/MXN. While a one or five day chart may not be convincing enough for speculators to change their perceptions. One, three, six and twelve month charts will likely do the trick. The USD/MXN has certainly shown an ability to correlate to the broad Forex market regularly, but it also has shown the distinct advantage of discounting risk premium that escalated upon the elections in Mexico in the late spring of 2024 and then the election of Donald Trump into the White House.
The current price of the USD/MXN is near 18.18800 and moving quickly on trading platforms. Yes, violent reversals do occur higher in the USD/MXN that can wipe out day traders if they are unlucky enough to wager during the wrong times, but as long as conditions remains rather tranquil the steady trend lower in the USD/MXN is easy to glance the past handful of months. However hindsight is nearly always perfect. The U.S Federal Reserve (looking forward) is likely to cut its interest rate this coming Wednesday.
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What Powell Says is the Important Part of Puzzle
Financial institutions have already sold the USD/MXN based on the expected interest rate to come this Wednesday. What they do not know is what Fed Chairman Powell will say when speaking. While the head of the U.S central bank is certain to sound cautious and conservative regarding his opinions, if he suggests the Fed may be able to cut the Federal Funds Rate again in early 2026 a couple of more times, this could send the USD/MXN lower again.
However, the intriguing ingredient for the USD/MXN is the knowledge even without an aggressive Federal Reserve, the currency pair has been able to trend lower. So even if Powell expresses uncertainty – which he likes to do – the USD/MXN may find more ways to discount the risk premium that built into the currency pair with a great deal of velocity in the summer and fall of 2024.
Mid and Long-Term Views are Not Short-Term Guarantees
Where it gets tricky for day traders is trying to figure out what the sentiment of large players will be in the short-term. While it appears many financial institutions still think the USD/MXN is likely still too high and has further room to traverse lower, short-term turbulence can last for one to three days, sometimes a week and even a handful of weeks.
- Choppiness is likely to be seen near-term because financial institutions have already sold the USD/MXN rather steadily the past few days.
- The ability to sustain value below the 18.20000 will be looked upon as important.
- The next target below is the 18.10000 ratio and that hasn’t been done since July of 2024.
- Risk taking tactics with solid management are highly encouraged.
- Traders without deep pockets should not get greedy because intraday movements can wipe out profits quickly.
USD/MXN Short Term Outlook:
Current Resistance: 18.20600
Current Support: 18.17700
High Target: 18.23900
Low Target: 18.15100
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