The first half of this year was not a good one for the emerging market currencies. They depreciated strongly against their US counterpart and the Mexican peso was no exception. But unlike the other emerging market currencies, the second half of the year was not that bad for the MXN, as it managed to recover everything that it had lost against the USD since the beginning of this year. If USD/MXN continues in the same direction, then it may close 2018 below its yearly opening price, which is at 19.640. For now, we remain bearish over near-term outlook of the USD/MXN pair.
Form the technical side, we can see that yesterday, USD/MXN broke its short-term upside support line, taken from the low of the 8th of August. Today, we are seeing a follow through in the pair’s selling, which is opening the path to levels. As USD/MXN broke its key 18.790 support line, the next potential area of support to watch out for could be near the 18.600 hurdle, marked by the low of the 27th of August. If that won’t be enough for the bears, a break below that hurdle could set the stage for a move towards the lowest point of August, near the 18.400 level, which could initially stall the rate, until the bulls and the bears decide who will take the driver’s seat from there.
Looking at our oscillators, the RSI is firmly sitting below its 50 line and at the same time is pointing to the downside. The MACD is also looking bearish, as it has now moved below zero and sits below the trigger line. In addition to that, the MACD is pointing downwards as well, which adds a more negative spin on the medium-term outlook of the pair.
For us to get comfortable with the upside, we would need to see, not only a move back above the aforementioned upside support line, but also a close above the 18.930 barrier, marked by the high of the 17th of September. Such a move could open the path towards the 19.120 obstacle, which was the inside swing low of the 7th of September. Further acceleration of the rate could lead to a test of the 19.380 level, marked by the peak of the 11th of September.
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