Talking Points for Mexican Peso Price Prediction:
- USD / MXN started the week with a rebound above the 20.00 grip.
- USD/ MXN is in the middle of a short-term bullish breakout falling corner pattern, but this is in the middle of a much longer falling wedge pattern.
- This bullish breakout appears to be at odds with the longer-term trend: are sellers waiting behind the scenes to pounce, or is this a short-term scenario with more leeway?
Last week, the USD / MXN test hit a new nine-month low, continuing a trend in place since last March. And given the prevailing market forces coming into the year, where the weakness of the USD has been to the fore in response to the FOMC pandemic response – this weakness was widely expected to continue. But, so far in 2021, this statement must be put on hold as USD / MXN bears have not been able to do much below the key psychological value of 20.00.
The weak trend of short sellers helped the pair enter a falling wedge pattern, marked by two converging trendlines of varying slope. The resistance slopes more aggressively as the bears remained aggressive in testing the lows; but support shows lower slope or angle as sellers slow down when testing new lows. Such formations will often be approached for the purpose of bullish breakthroughs, looking for a reversal from this weak trend in the direction of the earlier trend.
USD / MXN Four Hour Price Chart
Take a step back on the chart, and this near-term descending wedge fits into a longer-term descending wedge. And, again, both formations indicate the possibility of bullish reversals, albeit with varying delays.
It also denotes the possibility of an extended short-squeeze scenario after sellers have led price action for much of the time since the March surge. In the short term, traders can follow the current breakout of the short term formation, looking for longer term stress tests to assess the possible resistance of the uptrend.
The 2021 high is now very close at 20.2626, and beyond that is the current two-month high at a longer-term Fibonacci level of 20.6338. If the price action is able to test this level – then we would have a break from the longer term descending wedge pattern, and the next possible resistance area would be derived from a lot of earlier swing lows taken from October and November last. around 20.8484.
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USD / MXN Daily Price Chart
Graphic prepared by James stanley; USDMXN on Tradingview
— Written by James stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX