- USD/MXN oscillates in a narrow trading band near a one-week trough touched on Wednesday.
- The mixed technical setup warrants caution for bears and before positioning for deeper losses.
- A sustained strngth beyond the 38.2% Fibo. level will set the stage for some maningful upside.
The USD/MXN pair trades on the backfoot during the Asian session on Wednesday and consolidates its recent losses to over a one-week low touched the previous day. Spot prices currently trade around the 17.80 region, down 0.10% for the day, flirting with a confluence resistance breakpoint comprising the 200-day Simple Moving Average (SMA) and a multi-month-old descending trend-line.
Meanwhile, technical indicators on the daily chart have been retreating from higher levels, though manage to hold in the positive territory. This makes it prudent to wait for a convincing break below the aforementioned resistance-turned-support before positioning for an extension of the recent pullback from mid-18.00s, or the highest level since late March touched last week. Some follow-through selling below the 17.65 zone, representing the 23.6% Fibonacci retracement level of the fall witnessed in July, will shift the near-term bias for the USD/MXN pair back in favour of bearish traders.
Spot prices might then accelerate the fall to the 17.40-17.35 horizontal support before dropping further towards the 17.15-17.10 intermediate support. The downward trajectory could get extended and drag the USD/MXN pair to the 16.90-16.85 area and the multi-year low, around the 16.65-16.60 region touched in July.
On the flip side, the 18.00 round figure now seems to act as an immediate hurdle ahead of the 18.15-18.20 zone. This is followed by 38.2% Fibo., around the 18.30 region and mid-18.00s, or the monthly. A sustained strength beyond will set the stage for the resumption of the recent appreciating move witnessed over the past month or so and lift the USD/MXN pair to the 18.80-18.85 area, representing 50% Fibo. level.
USD/MXN daily chart
Techincal levels to watch