Potential signal
I am selling at the 50-day ema, (17.41) with a stop at 17.51.
I am aiming for 17.20 below.
The US dollar rallied a bit against the Mexican peso during the trading session on Wednesday as it looks like we are threatening the 50-day EMA again. The 50-day EMA has been a fairly reliable trendline over the last couple of months and of course has attracted technical traders into shorting it.
Ultimately, I think that the first signs of exhaustion are a selling opportunity, especially if we see interest rates in America start to roll over again. Even if we break higher from here, I'll be looking at the 17.50 level for a potential shorting opportunity as well at the first signs of hesitation and perhaps exhaustion.
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Market Outlook and Interest Rate Differentials
Ultimately, this is a market that I think given enough time will go lower, perhaps down to the 17.20 level, as the interest rate differential pays you to be short of this pair. I don't have any interest in trying to buy this market. I think it is only a matter of time before we do break down.
But if we rallied, the US dollar strength would probably be seen in multiple currency pairs, and there are places where you could buy the US dollar and not pay a swap, unlike here, which can get quite expensive over the longer term because of the interest rate differential favor in Mexico so much.
I'm looking for a sign to start shorting. We just have it. I will sell this pair again and aim for the 17.20 level before it is all said and done. This is a market that I think will eventually go back to the interest rate differential for guidance.
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