USD/MXN TECHNICAL OUTLOOK – BEARISH
The USD/MXN seems to head into a new week of downtrend momentum with the Mexican peso still showing some resilience despite the fact that it faltered the risk appetite because of the fiscal stimulus and election uncertainty.
Over the past few months, we have seen the USD/MXN consolidating the downside momentum with the initial bearish breakout already settled, and the pair left in an extensive downward trend. However, the range seems to be getting tighter towards the end of this month and this could mean a reversed pattern is highly likely.
USD/MXN 1-hour chart
As of today, the trend is negative, as the USD/MXN has been able to continue holding the bearish momentum with a 1-hour chart highlighting the break of the previous support zone from 21.30 and 21.15, even though the price rally has revisited this zone in very few scenarios with the US Dollar trying to recover the buyer support. The breakout of this psychological level at 21.00 spurred a selling rally and the key support levels is now possible.
20.83 is the point that halted the selling pressure back in September, as the USD/MXN was not able to nudge under this level largely since the covid-19 crisis started. This is a critical point that would most likely bring further the selling pressure incase broken, but it’s going to require some effort to get to this point. Incase broke, the next goal will most likely fill the covid 19 gaps from 20.46 and 20.35, where the bullish pressure would most likely start.
On the uptrend, the short-term resistance can be seen at 21.04 levels, even though the push over 21.30 is required to consider 20.88 as the interim low. It is highly likely that the selling pressure would increase in this zone as the new sellers see a great chance in the correction, but the external risk factors will cause the fast change in direction, which takes the USD/MXN back over 21.84.
USD/MXN Daily chart
On the wide time frame, the daily chart shows a dropping timeline created by the lower highs from April working as the resistance at 22.16 that coincides with 50% Fibonacci retracement to 25.78 from 18.56 rise. When it comes to the moving averages, they are put in a dropping order with the 20-day Simple Moving Average having crossed under the 50-day Simple Moving Average as the confirmation of an extra downside. Having said that, the stochastic seems to be trending below the 20 levels, which shows that the price reversal may be closer.