The US dollar has risen against the Mexican peso on Wednesday, as interest rates in American continue to dance around the 4.3% level again.
USD/MXN
The US dollar has risen against the Mexican peso on Wednesday as we continue to see concerns around the world about risk appetite. This obviously has a major influence on currencies like the Mexican peso, and it is worth noting that the US dollar continues to hang around the 4.3% level.
This is an area that has been important for some time and if we break above there it is likely that the US dollar will continue to go higher. In that environment we probably look at the 17.5 level as the next barrier that we will have to fight. After all we have the 50-day EMA just above there causing some issues.
Shorting Opportunities and Carry Trade Dynamics
So, with all of that being said, I would be looking for a shorting opportunity. You get paid to be short of this pair, so that is the direction I prefer to be in. But I also recognize that you probably would do better off if a strengthening US dollar becomes a thing across the board buying something like the dollar against the Swiss franc situation as opposed to trying to swim upstream when it comes to the carry trade.
Signs of exhaustion near the 17.5 level would be expected but if we don't see that then we could go to the 17.8 level. It is worth noting that we are in the process of potentially forming a bigger double bottom but again if the US dollar changes its attitude and suddenly becomes strong again this is not the trade that I will be looking for. If we can break down below the 17 level, then it could open up the door to 16.5.
The Mexican peso tends to be a very technically driven market as it tends to move 0.5 pesos at a time. That is something that I will take into account but again I am looking for an opportunity to get short probably based on good headlines coming out of the Middle East for the prospect of peace.