The US dollar fell against the Mexican peso on Wednesday as we continue to see a lot of noisy behavior and now it looks like we continue to see the overall interest rate swap come into the picture to get things going to the downside.
The market pays you to hold Mexican pesos as the interest rate differential is so wide, but I also would point out that this is a market that also moves on risk appetite and if risk appetite is fairly strong, that certainly helps the Mexican peso.
Keep in mind that Mexico's economy is highly sensitive to the US economy as Mexico is the number 1 exporter to America. So, if we get good news out of the United States generally speaking we'll get Mexican peso appreciation.
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Support and Resistance Levels
That being said, the area right around 17.15 is support and it extends down to the 17.00 level. Breaking below that could send this market much lower. Short-term rallies probably open up selling opportunities at the first signs of exhaustion. This is a play that has worked multiple times before.
I see resistance near the 17.40 level and then again at the 50-day EMA just above there. Quite frankly I would love to see some type of pop here that I could start shorting at the first signs of exhaustion as it goes with the longer term. This USD/MXN pair remains choppy, but if we do get a breakdown in this area, it could signal that the US dollar is going to really fall apart overall in the currency markets.
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