• USD/MXN starts the new week on a positive note, moving away from multi-year lows.
  • The RSI on the daily chart shows oversold conditions on the daily chart and provides support.
  • The formation of a descending channel indicates a well-established short-term bearish trend.

USD/MXN moved higher during Monday’s Asian session, although it lacks bullish conviction and remains within reach of its lowest level since December 2015. The pair is currently trading around the 17.0915-17.0920 region, slightly above 0.10% for the day and has so far managed to defend the support marked by the bottom of the almost month old descending channel.

Technically, the Relative Strength Index (RSI) on the daily chart is flashing oversold conditions, preventing traders from taking fresh bearish bets around the USD/MXN pair. That said, the lack of any meaningful buying suggests that the months-old downtrend is far from over. Thus, any attempt at recovery could attract fresh sellers near the 17.2550 area, which coincides with the 50-time simple moving average (SMA) on the 4-hour chart.

This, in turn, should cap the USD/MXN pair near the trend channel resistance, which is currently pegged at the 17.2600 round, which should now act as a key point for short-term traders. A convincing break of the said barrier will indicate that the USD/MXN pair has formed a short-term bottom and will pave the way for another strengthening move towards last week’s high, around the 17.3345 area.

On the other hand, the multi-year low, around the 17.0245-17.0240 area touched on Friday, now appears to be protecting the immediate downside from the support of the trend channel, currently around the psychological level of 17,0000. A convincing break below the latter will signal new a bearish collapse and will set the stage for an extension of the recent well-established bear trend we have seen over the past three months or so.

USD/MXN 4 hour chart

Key levels to watch

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