- The US dollar has plunged against the Mexican peso during the trading session on Friday after Jerome Powell suggested at Jackson hole that he was open to the idea of cutting interest rates.
- This works against the value of the US dollar, and the Mexican peso should benefit due to the fact that the interest rate differential is rather wide.
However, we have to ask the question whether or not the Mexican economy is going to suffer if the U.S. economy starts to struggle. Now, I think it's early to make that decision and we had been in a downtrend previously. So I'm not willing to start buying because the economy is slowing down, but I am watching the 18.50 pesos level because if we break down below there, the market is likely to drop even further after all this is a market that I think continues to be very noisy but if you are patient enough like with most exotic currencies you have a situation where you can really clean up on the interest rate differential over the longer term in fact all you had to do was short this back in the middle of April and you've made a fortune.
50 Day EMA Above
The 50 day EMA is sitting above the last couple of candlesticks, and it does offer a bit of a trend line to the downside. But at this point, I need to see a daily close below the 18.5 pesos level because if we get that, it opens up a flush lower rallies at this point in time. I would look at with suspicion until we can clear the 19 pesos level. And at that point, I would also need to see the U S dollar really take off against multiple currencies, not just this one in that environment it would probably be in response to serious concern about the global economy.
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