The U.S. dollar rose again on Thursday, as we are looking at this market working against the interest rate situation.
USD/MXN
The U.S. dollar has risen against the Mexican peso as GDP numbers came out a little bit hotter than anticipated during the trading session. The PCE numbers came out as expected at 0.3%, but that does call for perhaps continued tight Federal Reserve behavior.
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We are getting close to the 18.8 level, an area that I think extends to 19. We are definitely swimming upstream despite the fact that rates have rolled over a little bit. There is some talk about Mexico perhaps having to remain a little bit dovish.
But this is a pair that I only trade in one direction, and that is to short it.
If the U.S. dollar really starts to take off against multiple other currencies out there, then typically I'll buy the dollar against maybe the Swiss franc or something like that. I prefer to get paid to be correct as opposed to pay to be correct, which is a major distinction in this pair.
If we break above the 19.1 level, then I think that opens up a move all the way to 20, which may be able to be done. We'll just have to wait and see. A lot of this is going to come down to economic news.
The Federal Reserve did have two members yesterday vote to hike, so there is still that specter out there. The way the market looks at it, they are expecting an interest rate hike in December, and again in March is starting to get to be a 50% chance as well. So, interesting days we live in.
Regardless, I don't want to buy it here. Even if I did decide to go long, I would prefer to see some type of pullback, maybe closer to the 18 level. Right now, we are starting to dig into a very noisy neighborhood, so I think a little bit of resistance could show up. If we rip to the upside here, I'll probably buy the dollar against lower-yielding currencies.
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