The US dollar has fallen again during the trading session on Thursday against the Mexican peso, as we have reached the 200 Day EMA. This is obviously a very important technical indicator, so it will be interesting to see whether or not this holds as support. Furthermore, this is an area that has been somewhat important in the past, so be an area to pay close attention to.
The Mexican peso is somewhat correlated to the crude oil markets, and as we have seen a recovery in that market, it does make a certain amount of sense that we would see the Mexican peso strengthen. Furthermore, this pair also has a lot of noise in it due to the fact that a lot of remittances from Mexican laborers will have a certain amount of influence, but at this point, I think it is probably more about the macroeconomic crude oil situation than anything else. Keep in mind that a lot of Mexican oil ends up in the United States.
If we break down below the 20.50 pesos level, then it is likely that we will then reach the 20.25 pesos level. That is an area that has been support a couple of times, and with even the site of a double bottom previously, so that should be an area of significant demand. Anything below there would open up the trapdoor for a move down to the 20 pesos level.
On the upside, we need to break above the 20.75 pesos level to start buying, but at that point, I think we would probably make a beeline to the 21 pesos level. Ultimately, this is a market that is going to move not only on the US dollar itself, but the crude oil markets so there are a lot of headwinds in both directions. We got parabolic there for a while, and now we have corrected this move completely. The next day or two should be rather crucial, and risk appetite could again come into play so keep that in mind as well. It is worth noting that this pair tends to be very volatile at times, so keep your position size reasonable, and respect the fact that it is an exotic pair. Because of this, money management is crucial when trading this market, right along with any other exotic currency pair.