- The US dollar rose a bit in the early hours of Tuesday, as we are trying to break above the 18.20 level, an area that has been important multiple times.
- This is an area that offers a bit of “market memory”, and it is probably worth noting that the market for this currency pair is very technical in its nature.
- Because of this, it doesn’t surprise me that the US dollar hasn’t been able to break higher easily. Also, it is worth noting that this area, the 18.20 level, has been very difficult to get above.
Technical Factors
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The technical factors in this market continue to be important, as the massive downtrend line continues to have an influence on the price of this pair. This is a market that will continue to be in a downtrend as long as this line continues to hold. However, if we break above the 18.20 level, this market could reach the 18.80 level above, which previously has been important as well.
The 50 Day EMA is in this region and could continue to see itself offer resistance as well. However, this pair will also be watching the 18.20 level as a floor, as has been important as of late. A move below there opens up a move to the round figure, the 18 MXN handle. This market has been in a downtrend for some time, and I think as long as the US economy is ok, this is a market that should continue to drop.
The inverse correlation in this pair is that the Mexican peso continues to strengthen with the US economy. This is because Mexico is the world’s largest exporter to the US, and therefore, it comes down to whether Americans are buying those Mexican products. It is a lot like having a business with a huge customer; the customer has to be strong to keep the business afloat. Furthermore, the interest rate differential favors the peso, so this will continue to help the downtrend as well. I believe that a lot of rallies could get sold into on signs of exhaustion.