Although most US pairs seem have had a quiet day, USD/MXN finally muscled its way through the 19.7700 level we had discussed last week. On Thursday, the Bank of Mexico surprised the market by cutting interest rates to 8.0% from 8.25%. The market reaction was to sell USD/MXN into the initial market rally. However today, the pair pushed higher to 19.8932, taking out all the weak stops with it. This also pushed the short-term RSI into overbought territory and is currently trying to unwind back below the 70 level.
Source: Tradingview, City Index
Where does USD/MXN go from here? Buyers may look to pick some up at a retest of the 19.75/19.77 area. Stops can be placed below the rising trendline near 19.65.
Source: Tradingview, City Index
On a daily, the downward sloping trendline from the longer term triangle comes into play around 20.15. The 127% extension from the highs on May 31st to the lows on July 5th come in near the same level. Sellers may look to get in around that level, with a stop above the trendline, around 20.25.
However as we wrote last week, it may take a break above 20.00 or below 19.00 (the apex of the triangle) to determine the longer term direction.
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