Return to Known Values after Violent Trading Storm

The USD/MXN is priced near value it was essentially trading this time last week, but in between the five day duration plenty of price activity has taken place.

The USD/MXN is trading near a price around 17.12400 as of this writing.  If you have not looked at the USD/MXN the past handful of days, you can be forgiven for thinking nothing substantial has taken place in the currency pair. However, the past handful of days has seen strong price action and this started on last Wednesday when the U.S returned from its holiday and American financial institutions caused full volume to take the USD/MXN below the 17.00000 level for almost 12 hours as it tested its lower depths.

Then on early Thursday the USD/MXN started to see incremental buying develop into strong bullish action, and within a half day of results the currency pair was suddenly trading near a high of 17.38200.  From this high a reversal lower took place and the 17.20000 vicinity was tested, but on early Friday another bolt up tested highs again near the 17.38000 ratio. Only to see another fall in prices develop shortly afterward.

While employment numbers from the U.S came in slightly weaker than expected, inflation data via the Average Hourly Earnings came in stronger than anticipated on Friday.  While some analysts may point to the jobs numbers as the reason for the fall back to the lower depths of the USD/MXN late on Friday to around 17.0650, this is not the whole story and more complexity is at the heart of the matter. The USD/MXN has been within a long-term bearish cycle and it is challenging values last seen in early 2016.

The return to the lower elements of the USD/MXN highlights the downward pressure seen the past year for traders. However, because support often proves durable and it is hard to ‘time’ the next leg down in the USD/MXN, speculators cannot bet blindly on downward momentum always happening. If a trader is using leverage and is not using adequate stop losses, moves seen on Thursday and Friday of last week can be very expensive. Traders must use caution, and risk management is essential.

• The past month of trading in the USD/MXN has seen a lot of price action near the 17.10000 ratio and this is likely to continue early this week.
• Traders should stay realistic and not bet wildly on large moves in the USD/MXN and they should protect their positions against sudden fireworks developing.
• Inflation data from the U.S on Wednesday and Thursday of this week could cause momentary price volatility to strike in the USD/MXN again.

Current Resistance: 17.14550

Current Support: 17.11100

High Target: 17.18900

Low Target: 17.08400