After the overnight threat From Trump to impose tariffs on all Mexican goods, the Mexican peso devaluated against its neighbouring US dollar. The spike was so strong that USD/MXN went back to test the levels last seen in the end of December and the beginning of January. For now, we believe that, as long as the US government continues to apply economic pressure on Mexico, the US dollar might have the upper hand against the Mexican peso, which could lead the pair further north for a while.
So far, the USD/MXN-rise got held near the low of December 20th, at around 19.808. Even though we may see a small retracement back down, as long as the rate remains above the 19.622 hurdle, marked by the highest point of March, we will stay positive about the upside potential. Another push higher, and this time a break above the 19.808 barrier, could invite more buyers into the game, who could lift the pair to the 19.969 area, marked by the high of December 26th. Slightly above that area, and just fractionally above the psychological 20.000 zone, sits another possible resistance level, at 20.026, which is the high of December 21st.
Our oscillators, the RSI and the MACD, seem to be supporting the above discussed scenario so far. The RSI is above 50 and is aiming for the 80 zone. The MACD, already positive, today has jumped above the trigger line and is also now pointing to the upside.
Alternatively, a fall below the aforementioned 19.622 hurdle, could raise concerns about the short-term upside idea. But in order to shift our view to the downside, we would wait until we see a clear drop below the 19.480 zone, which is the high of March 29th. In such a case, the bears might fully take control of the steering wheel and send USD/MXN towards the 19.380 obstacle, a break of which might open the door to a potential test of the 19.290 area, which was a strong resistance area on Wednesday (now turned into support). We may see a small bounce from that area, but if the rebound is short-lived, the bears could apply pressure once again and drive the pair below the 19.290 line and aim for the 19.122 level, marked by the high of May 21st and the low of May 29th.
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