Potential signal:
- I am selling here.
- I have a stop at 18.45 and a target of 18.30
The US dollar tumbled below 18.50 against the Mexican peso on Friday, pressured by risk sentiment and yield differentials. With the peso still supported by higher rates and strong exports, rallies may remain selling opportunities toward 18.20 or even 18.00.
Top Forex Brokers
The US dollar plunged against the Mexican peso during the trading session on Friday, as we are now below the 18.50 level. The US dollar shrinking against the Mexican peso is not a huge surprise, considering that we had seen a lot of damage in the US stock markets. That being said, the Mexican peso is a little bit of a different market than many other currency pairs when it comes to trading it against the US dollar, as traders will continue to see this as a scenario where we have broken down pretty significantly.
Any Follow-through?
Now the question is, will we get a little bit of follow-through here? We might, we don’t know. But I do think you have a situation where the interest rate differential continues to favor the Mexican peso, and that’s something that you need to be cognizant of because it pays you to get short of this pair. That doesn’t necessarily mean that you need to jump in with a huge position, but overall, it does tend to tilt to the downside.
That also tends to be the case, mainly due to the fact that the US economy is doing fairly well means that there is a massive amount of demand for Mexican goods, as Mexico is the world’s largest exporter into the United States. If we were to turn around and break above the 18.80 level, then I think maybe the US dollar really starts to take off. But at this point, I don’t see anything stopping it from trying to get back down to the 18.30 level. Below there, we have the 18.20 level, which has been a significant floor in the market, opening up the possibility of a drop down to the 18.00 Mexican peso level. If we were to drop below that level, unless we get some type of massive risk-off type of event, I think this is a pair that still favors shorting rallies that show signs of exhaustion.
Ready to trade our Forex daily analysis and predictions? Here are the best forex brokers in Mexico to choose from.