- The Thursday session has been noisy in the USD/MXN currency pair, as the US dollar initially fell during the trading session, but just as we had seen on Wednesday, buyers came in to pick up the US dollar near the 18.25 MXN level.
- This pair has been in a significant downtrend for some time, but it does look like we are trying to at least form some type of bounce here.
- This is interesting, because most traders out there would be assuming that the Federal Reserve rate cut only confirmed what people thought about the dollar and the first place.
Resistance Above
If we do get a bounce from here, and I think that’s likely, it’s very possible that the market sees a lot of resistance near the 18.50 MXN level, an area that has been significant support previously, and therefore I think you’ve got a situation where a little bit of “market memory” could come into the picture to offer a bit of a ceiling in the market. Any rally to that area more likely than not will see a certain amount of exhaustion just waiting to happen, and if and when the market roles over in that area, it does make a certain amount of sense that we would see the pair drop again.
However, if we break above that level, then you have to be looking toward the 50 Day EMA as a potential target at the 18.67 MXN level. This is an EMA that has acted very much like a trend line, so I would anticipate a little bit of action near that area in the form of resistance. Anything above the 50 Day EMA then opens up the possibility of a much bigger move, perhaps to the 19 MXN level, where at that point in time you would be talking about possibly threatening the 200 Day EMA, something that would be a huge change in tone.
At things stand now, we are still in a bearish market, but it looks like we might get a little bit of a relief rally. It’s also worth noting that the US dollar is starting to show signs of resiliency against multiple much as the Mexican peso.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
