USD/MXN Technical Forecast: Bearish
USD/MXN looks set to renew downside momentum in the week ahead as traders remain hopeful about a stimulus deal in Congress.
Donald Trump’s political posturing has left markets slightly confused, as he seems to be unclear on his stance on certain topics. The stimulus package is now the centre of attention for traders as we head towards the election date, with a political impasse in Congress being a major risk factor in the weeks to come. That said, the fallout from failed talks is likely to be less impactful than a positive outcome, given what we saw in Asian markets after Trump supposedly pulled out of the stimulus talks. At the end of the day, investors assume whoever wins the election is likely to roll out measures to aid the economy at some point.
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USD/MXN 1-hour chart (17 September – 09 October 2020)
The one-hour chart seems to suggest a confluence of bullish pressure between 21.30 and 21.24, where three attempted bearish breakouts have been rejected. Price action is also limited on the upside by a confluence of moving averages, leaving USD/MXN range-bound in the short-term. In regards to the positioning of the moving averages, a bearish cross of the 50 hour SMA below the 100 hour SMA could point to further downside momentum if the key area of support can be invalidated and USD/MXN moves towards 21.20.
The next point of reference the low on the 21st of September, marking 21.05 as the next immediate support, where price action turned positive ahead of the massive surge seen at the end of September.
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USD/MXN daily chart (30 January – 09 October 2020)
If we look at the daily time frame, USD/MXN now rests at its 61.8% Fibonacci retracement level of the surge from 18.56 to 25.78, located at 21.32. This area has offered support in the past, but a daily close below this level could prove helpful in getting the pair lower. That said, a bearish break won’t be confirmed until further support is taken out around 20.85, at which point sellers are likely to regain control.
— Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin