The US dollar has fallen again against the Mexican peso, breaking below the hammer from the previous session, a sign of weakness I often trade. This is a market that pays you to stay short, in the “carry trade.”
USD/MXN
The US dollar has fallen again against the Mexican peso, breaking the back of a hammer from the previous session, which I think is a sign that we are ready to accelerate to the downside. This does make a certain amount of sense considering that US economic numbers really aren’t that bad, and at the same time, we have a shrinking US dollar. This works both sides of this equation, not to mention that it’s also a carry trade.
The first part of the USD/MXN equation here is going to be the interest rate differential, which Mexico is almost twice what the United States is, or getting close to it. At the same time, the US economy is still buying things. There are still sales. Mexico is the world’s largest exporter to the United States, so this helps Mexico and people tend to invest there.
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The Carry Trade Advantage
Furthermore, you have the US dollar softening against most things anyway. So that’s just three different things that have jumped into the market today to make this a very negative day. That being said, momentum itself is a reason. I think the 17.50 level above offers a certain amount of resistance that traders will be watching for, and then again, we have the 17.92 level where the 50-day EMA is, assuming we can get there.
I believe that we see 17 pesos pretty quickly here in a market that pays you to hang on. The 16.6 level would be my next area of interest. This is a market that is a grinder, so be prepared to exercise patience here.
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