Mexican Peso Forecast: USD/MXN Rates Break Critical Support Region - Key Levels

MEXICAN PESO WIN STREAK CONTINUES POST-US ELECTIONS

The Mexican Peso has had a strong November thus far, particularly in the wake of the US presidential election. The prospects for reduced trade tensions with Mexico’s largest trading partner, the United States, coupled with expectations for a continued accommodative US policy outlook, has attracted speculative capital to the Mexican Peso. USD/MXN rates are on pace for their second-worst month of 2020, and only the fifth time in the past five years that USD/MXN rates have lost more than -5% on a monthly basis.

MEXICAN PESO FOREX ECONOMIC CALENDAR - REST OF WEEK

The Thanksgiving holiday in the United States upends financial markets, creating illiquid trading conditions and a thinner economic calendar. That said, there are still a few data releases over the coming days that could introduce volatility to USD/MXN rates in otherwise thin markets – treacherous conditions for new traders given the prospect for sharp price swings. Thursday’s final Q3’20 Mexican GDP release and Banxico’s monetary policy meeting minutes could easily provoke sizeable moves in an otherwise quiet market.

USD/MXN RATE TECHNICAL ANALYSIS: DAILY CHART (NOVEMBER 2019 TO NOVEMBER 2020) (CHART 1)

(Click on image to enlarge)

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USD/MXN rates remain in the parallel downtrend dating back to the coronavirus pandemic high set in April. The downtrend is robust, with three clear points of resistance in April, September, and November – in fact, the November touch of resistance came on the day of the US election. Since the November resistance test, which came in the form of a bearish outside engulfing candle, USD/MXN rates have been biased lower.

Bearish momentum has accelerated, with USD/MXN rates below their daily 5-, 8-, 13-, and 21-EMA, which is in bearish sequential order. Daily MACD is trending lower below its signal line, while Slow Stochastics are nestled in oversold territory. In recent days, two significant Fibonacci retracement levels serving as critical support have broken: the 76.4% retracement of the 2020 low/high range at 20.2349; and the 38.2% retracement of the past 10-years of trading low/high range (April 2011 low/April 2020 high) at 20.3215.

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