The US dollar tried to rally to kick off the session on Friday, but the Mexican peso strengthened again later in the day to continue the overall bearish behavior.
USD/MXN
The US dollar tried to rally against the Mexican peso during the trading session on Friday, but has since fallen well below the 17.50 level again. At this point, I think the downtrend is trying to reassert itself, and that makes a certain amount of sense considering that the interest rate differential still favors Mexico, despite the fact that the GDP numbers Mexico has been rather troublesome. And, of course, the Central Bank of Mexico is more likely than not to be in a neutral stance.
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That being said, at the same time, we have the US Central Bank supposedly being bet on by traders to raise interest rates twice between now and the end of the year. Whether or not that's actually true remains to be seen, but you get paid to be short of this pair, and I think the overreaction recently may be coming to an end.
Technical Support and Key Levels
If we do rally and break above the 17.70 level, then we'll challenge the 200-day EMA. This is an easy pair for me to trade because I don't pay the swap. I won't be bothered to go long the US dollar if the US dollar really takes off against the Mexican peso. That means it's probably taking off against some other currencies, and I will just buy the dollar in other terms. The last thing I want to do is get caught in a situation where it gets expensive to hang on to my position.
If the market were to break down below the 50-day EMA, then the 17.20 level gets targeted, and that's the move I actually prefer. It looks like Friday is starting to see some of that downward pressure, so I'll be looking to get short here relatively soon.
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