This is not a growth play; this is a simple yield play for most traders at the moment.
The Mexican peso rallied a bit against the greenback on Monday to crack down below the 200-day EMA yet again. We have seen this move over the last three trading sessions, but what is interesting about this particular one on Monday is that the dollar’s selloff actually stuck. You can see that the previous two candlesticks ended up being hammers, so now that we are retesting this area again it does suggest that perhaps we are more likely than not going to see a little bit of selling here.
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The 20.25 pesos level might be where we go next, especially as the Mexican peso is influenced by oil prices. Oil has been rallying for some time, and as a result it makes sense that the peso might get a little bit of attention. Over the longer term, it is very likely that we will continue to see this market break down below that level and go looking towards the 20 pesos level. There are a lot of concerns out there about inflation, but the Mexican Central Bank has raised interest rates a few different times and has that petroleum connection that a lot of people like.
This is not a growth play; this is a simple yield play for most traders at the moment. I do not necessarily know if we can break down below the 20 pesos level, but it certainly looks like we are at least going to visit that general vicinity and try to figure out what to do next. The markets have been extraordinarily noisy over the last couple of weeks, and I do expect more of this nonsense going forward. While the Mexican peso does not seem like it would be connected to the Ukraine/Russia noise, the reality is that it is connected to oil, which by extension is also connected to that mass.
If we turn around and break out above the highs of the trading session on Friday, that could send this market looking for the 20.75 pesos level, but one would have to believe that if that was where we were going, we probably would have done it over the last couple of trading sessions. This market looks heavy, and it seems as if it is ready to drift a bit to the downside.
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