- USD/MXN drops below last Thursday’s low, extending its losses to a fresh multi-year low of around $18.40.
- USD/MXN Price Analysis: A break below $18.40 would pave the way toward $18.00.
The USD/MXN hit an almost 4-year-and-a-half month low around 18.4485, a level last seen in October 2018, extending its losses by 0.89% in the week. At the time of writing, the USD/MXN exchanges hands at 18.4161.
Since the beginning of the week, the Mexican Peso (MXN) has shown resilience to register a daily loss vs. the greenback (USD). Even though the USD/MXN Tuesday’s session finished in the green, prices were reluctant to break solid resistance around the 20-day Exponential Moving Average (EMA) at 18.7999 that day. Albeit the USD/MXN closed with gains of 0.31%, analyzing price action, the large wick on top of Tuesday’s candle’s body was a forecast of what was upcoming in the rest of the week.
Hence, the USD/MXN dropped for two consecutive days, and it’s on its way toward the 18.00 psychological level, as it has decisively broken the $18.50 mark.
The USD/MXN’s next support would be August 7, 2018, daily low at 18.4047. Breach of the latter and the next support would be the psychological $18.00 barrier. Once cleared, the USD/MXN would dip to April 17, 2018, swing low at 17.9388, which would be up for grabs.
Contrarily, if the USD/MXN reconquers $18.50, that could open the door for recovery. Therefore, the USD/MXN first resistance would be the 20-day EMA At 18.7312, followed by the confluence of the February 9 daily high and the 50-day EMA around 18.9922. Once cleared, the next stop will be the 100-day EMA at 19.2869.
USD/MXN Daily chart
USD/MXN Key technical levels
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The MXN/USD currency pair has recently collapsed to an almost 4 ½-year low of 18.4000. This marks a significant shift in the market, as the currency pair had been steadily trading in the 19-20 range for the past two weeks.
The USD remains strong, as the US economy has held up relatively well during the pandemic and indications of a booming recovery bolster confidence in the nation’s currency. Furthermore, the US administration’s announcement of additional stimulus payments and a potential forgivable loans plan has bolstered these signals.
On the other hand, uncertainty has plagued the Mexican economy due to the slow rate of vaccinations and the fiscal deficit remaining high. This combination of greater fiscal uncertainty and respective national strategies likely weighed heavily on the peso.
Moving forward, analysts expect the current trend of a strengthening USD relative to the MXN to continue, unless there is a major development in Mexico’s vaccine rollout, coupled with increased fiscal stimulus domestically, which could potentially mitigate the effects of this downward trend.
That being said, given the trajectory of the peso, investors should remain cautious with long-term investments, as the value of the MXN is highly contingent on the overall global economic health. In the short-term, however, there could be potential opportunities in riding this shift to capitalize on gains.