- The US dollar has fallen rather significantly against the Mexican peso during the trading session on Monday, as we have seen US dollar weakness across the board.
- This is a pair that you would expect to see play out if the US dollar is weakening mainly due to the fact that there is so much in the way of the interest rate differential.
- However, there are some things that I would be watching very closely at this point because we got some pretty bad news from the US economy during the session, and while you think that would make the dollar negative, the reality is that in this pair, it can have quite the opposite effect.
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The Manufacturing PMI numbers coming out of the United States were contractionary, so therefore I suspect that sooner or later that could be a problem for Mexico. Right now, it isn’t, but if we continue to see a lot of weakness in the US economy, then Mexico has to worry about whether or not they will have the ability to sell products to their biggest customer, the United States. With that being said, the market is likely to continue to see a lot of volatility, but the downtrend has been very firm over the last couple weeks, we just have the 50 Day EMA breaking down below the 200 Day EMA, kicking off the so-called death cross.” This is a very negative turn of events from a technical analysis standpoint, and therefore I think certain longer-term traders will be paying attention to it.
I am currently watching the 19 MXN level, and I do think that’s where we are trying to get. If we break down below that level, then the market is likely to continue to see a lot of volatility and breaking down below the 19 MXN level up the possibility of a significant drop from there. Short-term rallies could offer resistance near the 19.50 MXN level, but right now I think it’s very difficult to get bullish, and I’m looking at rallies with suspicion here.
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