I think that any bounce is probably temporary, but I do think that the market is a little overdone.
The US dollar fell significantly on Monday to kick off the week, as the Mexican peso continues to show signs of strength in general. This makes a certain amount of sense, especially as oil has taken off to the upside yet again. Remember, oil is one of the main exports for Mexico, so this all ties together quite nicely. As oil rises, more demand for the peso should be what we see.
Latin American currencies can give great price movements.
Trade them with our featured broker.
It is worth noting that we are sitting at the 20.25 pesos level, an area that has been supportive multiple times in the past. This could be a “triple bottom”, so it is worth paying close attention to this area. What I would say is that we got here too quickly to simply slice through it. Ultimately, this is a situation where you could see a big fight, perhaps even a big bounce. If we do bounce from here, the 20.50 pesos level could be an area of resistance that we go looking towards. It is also worth noting that the area features the 200-day EMA, which attracts a certain amount of attention in and of itself.
If we were to break down below the 20.25 handle, then the next logical target would be the 20 pesos level, as it is a large, round, psychologically significant figure. The market breaking down below there could open up a flood of selling, but I think it is going to take quite a bit to make that happen. In fact, I think in the short term we are more likely than not to see a little bit of a bounce. Whether or not that is something that is sustainable is a completely different question, but obviously, we are in the realm of being oversold. (I do not need any type of oscillator to tell me this; simple observation of the fact that we have fallen straight down tells you everything you need to know.)
The central bank in Mexico has raised rates recently, so that makes the peso a little bit more attractive as well. The situation with oil is not something that is going to go away anytime soon, so that also favors the peso. I think that any bounce is probably temporary, but I do think that the market is a little overdone.
Source link
