Any bounce at this point in time should invite fresh selling in this pair, as the trend is so heavily ingrained into the market at the moment.
The US dollar rallied a bit against the Mexican peso during trading on Friday but still remains rather weak looking against the Mexican peso. Any bounce at this point in time should invite fresh selling as the interest rate differential continues to favor Mexico by a wide margin. Recently, the central bank in Mexico reiterated its monetary policy as being one that was essentially on hold, despite the fact that they had just cut 25 basis points down to an overnight rate of 7%.
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That being said, any rally at this point I think is an opportunity to get short. I would look at the 18 level above as a major barrier that's going to be difficult to overcome. The 50-day EMA is now racing toward that 18 level. With that being said, I like the idea of fading signs of exhaustion when I get the opportunity.
Major Barriers and Targets
The 17.5 level below should be a target, and I do believe that we will probably break through there and start to look towards the 16.8 level before it's all said and done. Remember, you get paid at the end of every day to hold this pair short. Until we see some type of major risk-off type of scenario, I think you have to believe this market will continue to be bearish.
Keep in mind also that Mexico is the largest exporter into the United States, and that has a major influence on how this plays out, as the better the US does, the better the Mexican economy does. With that being said, it does strengthen the peso when announcements like retail sales being larger than anticipated the other day come out; it suggests that more Mexican goods will be sold.
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