USD/MXN provided some upward momentum in recent days of trading, but a reversal higher developed after extreme lows were challenged.
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The USD/MXN is trading near the 16.97500 level at the time of writing. Since Wednesday last week, when USD/MXN was trading near the 16.70000 ratio, the currency pair has developed quite solidly upwards. However, day traders should keep this in perspective and recognize that USD/MXN is moving in the lower depths of its long-term prices. USD/MXN traded near the 16.69300 mark on Tuesday last week.
USD/MXN’s move higher over the past few days has been correlated with the broad forex market. Traders who believe that USD/MXN will suddenly develop massive upward momentum should definitely question their conclusions. USD/MXN has seen some of the strongest bearish trades of any major currency pair over the past three years. While the downward price momentum will certainly eventually evaporate, it may not happen in the medium term.
Traders tempted to sell USD/MXN on slight moves higher cannot be blamed. 17.00000 should definitely be watched as an important psychological barrier for USD/MXN, and if prices hold below this level in the short-term, it may indicate that further behavioral sentiment remains in financial institutions that could lower the pair. The US Federal Reserve is likely to raise its interest rate on the 26thThursday July, this Wednesday, but this potential 0.25% increase has already been factored into USD/MXN.
What traders and financial institutions need to understand over the next few days is what the Fed’s FOMC statement is going to say. The lack of clarity on the Federal Reserve’s potential outlook for future interest rate hikes has likely caused a significant amount of cautious trading to build in recent days, likely helping to add some buying momentum to USD/MXN. However, if the Fed raises the federal funds rate as expected, but shows a less aggressive outlook in its FOMC statement, this could reignite USD/MXN sellers.
- Resistance near the 17.00000 level should be used by day traders as a near-term sentiment barometer in USD/MXN.
- The Fed’s rate decision and Wednesday’s FOMC statement may create somewhat choppy USD/MXN conditions by then, opening the door for quick tests of support and resistance levels for conservative leverage bets.
Current Resistance: 17.01100
Current support: 16.96100
High Aim: 17.05500
Low Target: 16.89990
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