Potential signal:
- I am a seller of this pair on a break below the 18.50 level with a stop at the 18.8 level, and a target 17.75 below.
The US dollar has rallied a bit against the Mexican peso during the early part of the trading session. And this is a market that looks as if it is trying to find the 18.50 Mexican peso level as a bit of floor. This could be a triple bottom, although I think this is a short term thing probably a lot of people out there trying to cover shorting the US dollar ahead of the consumer price index numbers coming out on Thursday.
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The size of the candlestick is fairly strong, but I also recognize that this is a market that has been very negative for a while. And I think you've got a situation where a rally at this point in time, more likely than not, will offer a short opportunity.
Fading Rallies
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This will be especially true if we get anywhere near the 50 day EMA at the 18.87 level and dropping. So the next day or two, I think you could probably watch this for signs of exhaustion. If CPI numbers come out really hot, then that could cause some major issues. But quite frankly, this is a market that I do think goes to the downside. If we were to break down below the 18.50 level, then I think the Mexican peso strengthens even further, perhaps opening up the possibility of a move down to the 17.75 level.
Remember, if you are short, you are collecting swap at the end of every day in this market. Ultimately, this is a market that will continue to be noisy and choppy, but rallies are selling opportunities at the first signs of exhaustion from what I can see. And quite frankly, I'm not interested in buying the dollar against the Mexican peso until we break above the 19 level.
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