The US dollar rallied against the peso on Friday, as traders continued to react to global headlines, and the jobs number that was mixed at best.
USD/MXN
The US dollar rallied against the Mexican peso during the trading session on Friday as we are starting to see a little bit of fear out there. With this being the case, I think we have a situation where traders are going to be watching this very closely because this is a market that I think really is very influenced by economic activity in the United States as well as global risk.
With all of that being said, it is worth noting that when this market rises it is flying in the face of interest rates. The interest rate differential favors the Mexican peso quite significantly, so this is a great carry trade pair. If you have been watching my analysis for a while, I have mentioned the 18 pesos level as being very important.
Key Support and Resistance Levels
We are starting to get to that area, and I think it could be a big battle. Signs of exhaustion I have no issue shorting unless of course we get some type of psychotic panic driven meltdown, which is possible. As things stand right now, as long as the US economy is somewhat healthy, I think you have a situation where the Mexican economy benefits.
The market showing signs of exhaustion could open up a drop back down to the 17.5 level. After that, we could be looking at the 17 Mexican peso level.
Ultimately, I believe this is a market that is going to continue to be noisy, but I do not buy this pair typically just due to the fact that if I want to buy the US dollar I can do it in a currency pair that I don't have to pay a large swap at the end.