The US dollar initially shot higher against most of the world’s currencies during Thursday, especially against emerging markets. Of course the Mexican peso represents Latin America, and therefore a lot of traders would have jumped into this market plays to short the currency. The US dollar caused havoc throughout the major financial markets, so with less liquid pairs such as the USD/MXN pair it will make quite a bit of sense that we get a spike. However, we sold off later in the day as the US dollar lost strength, and therefore we have turned around of form a massive shooting star.
The 50 day EMA is sitting right around this level as well, which is marked as red on the chart. The black EMA just above is the 200 day EMA, so we have a couple of different technical levels in the area that could cause some issues. Ultimately, this is a market that will continue to see a lot of volatility, but at this point it looks as if the 19 pesos level could offer minor support. If we can break down below there, the market will probably then dropped towards the two yellow rectangles I am underneath and the 18.75 pesos level.
A break down below there opens up the door to the 18.50 pesos level, perhaps even lower than that. Ultimately, if we did break higher, and perhaps above the 200 day EMA, then it would show extreme US dollar strength. I anticipate that if you were to see that here, it would probably coincide quite a bit of US dollar strength around the world against other currencies, not just the Mexican peso.
