The US dollar has fallen against the Mexican peso during the trading session on Thursday again, reaching down towards the 19.85 level.
This is getting rather close to an area that has been supportive as of late, and therefore I think it is worth paying close attention to this market, becomes a break down below the 19.50 pesos level could open up a fresh wave of selling.
Most retail traders have no idea, but the reality is that the Mexican peso it is highly correlated to crude oil, so that something that you need to pay close attention to. With that being the case, the market is likely to continue seeing a lot of upward pressure on the oil market, and therefore the Mexican peso may be one of the biggest beneficiaries. You have to somewhat counter that with the idea of the Mexican peso being one of the larger emerging market currencies. In other words, there is a sudden “risk off” type of attitude out there, then it is likely that we will see the Mexican peso get hammered right along with other currencies such as the Brazilian Real, South African Rand, and Chilean Peso.
Ultimately, this is a market that has been in a bit of a trading range as of late, but you should also take a look at the last couple of candlesticks, as they offer wicks to the upside, showing that even though the US dollar has tried to recover, the reality is that the sellers come in and overwhelm every time we make that attempt. The market will continue to be very choppy, but I do think that if we break down below the 19.50 pesos level, it is likely that we will go looking towards the 19 pesos level rather quickly. On the other side of the equation, if we were to take out the 200 day EMA, then it is likely we will go looking towards the 21 pesos level above. This could be a possibility if we suddenly get a lot of US dollar strength, or perhaps some type of concern when it comes to the Delta variant slowing down global demand for petroleum, which is something that has popped up from time to time. With that, I expect choppy but negative behavior more than anything else right now.