The US dollar tried to rally a bit during the early part of the trading session on Thursday against the Mexican peso and ended up testing the 17.50 level.
The 17.50 level is an area that's been important multiple times.
So, it's not a huge surprise to see that we have in fact, struggled to get above there.
If we were to break above that level and perhaps even as high as 17.60, then the market could go even higher.
That being said, I think any area on this USD/MXN chart that has shown the type of resiliency as far as resistance is concerned, like the 17.50 level, should attract a lot of attention. All things being equal, the fact that the market rolled over from there and started falling is just a continuation of the overall market action that we had seen.
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Interest Rates
Interest rate differentials continue to favor Mexico, and I think they will for the foreseeable future. The US interest rates did drift a little bit lower, but ultimately, this is a situation where we could drop towards the 17.25 level. The market has been consolidating for several months now, and I think we've got a situation where breaking below the 50-day EMA, like we did during the previous session of course, opens up a little bit of negativity, but ultimately, this is a pair that seems very stable at the moment.
So, if you are a short-term range-bound trader, you could have the opportunity to take advantage of the selling pressure at least for a short-term move. The 17.20 level underneath there is also support. If it were to give way, it could open up and move down to the 17.00 level.
All things being equal, I think this is a situation where we are just simply in a range right now. And that's how you have to look at this. The average trade lifespan will probably be two or three days, but there are profits to be made here.
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