#USDMXN Forecast: US Dollar Tries to Rally Against Peso (29 May 2024)

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  • The US dollar initially fell during the trading session on Tuesday but turned around to show signs of strength against the Mexican peso.
  • This will be interesting to watch, because we are getting fairly close to a major floor in the market, which is focused mainly on the 16 pesos level.
  • While we are currently at the 16.68 level and do have some distance the close between now and that level, we will more likely than not continue to see quite a bit of volatility.

Dynamics at play

Keep in mind that the Mexican peso is one of the few currencies out there that has a much stronger interest rate than the US dollar, and of course when people are more “risk on” in their attitude, they tend to invest in Mexico as it is a major exporter to the United States. In fact, Mexico is the largest exporter to the United States and the world, as the deep globalization in the United States has most certainly had a major effect on Chinese trade, and now is starting to favor the Mexican trade.

Beyond that, it’ll be interesting to see whether or not the 16 pesos level is defendant, because when you go back on multiyear charts, you can see just how important it is. As things stand right now, we have just simply been very noisy, and therefore I think it’s been difficult to hang on to this pair.

Just above, near the 16.80 level, we have the 50-Day moving average EMA which of course would be a technical indicator that some people pay close attention to. The 16.90 level is an area that is where we had seen previous selling pressure, and therefore it should end up being a certain amount of resistance as well. Ultimately, if we can break above that then we will probably go looking to the 200-Day EMA, near the 17.14 MXN level.

Underneath, we have recently bounced from the 16.30 level, but although it should be supported, it’s really the 16 level that longer-term traders will be paying close attention to, as it has been historically so important. Remember, you get paid to be short of this market, assuming your broker is a decent one that pays swap, and therefore it’s still easier to be short of this market than it is to be long.

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