Buyers and sellers are battling it out. There are some key levels to eye.
I was taking what has been a daily walk with my wife who is also confined at home during the coronavirus sheltering and feeling the effects of being couped up inside. We are fortunate to have some open space where we can get out and social distance in large open spaces. Our dog is very thankful too.
On the way out of the neighborhood yesterday, we passed a neighbor who works in the financial markets (stocks and bond), and he asked about the USDMXN (we kept a safe distance by the way).
Looking ahead, he speculated that the MXN would eventually benefit and commented that he is thinking about perhaps buying selling USDMXN (Arizona of course borders and many vacation south of the border).
Needless to say, the USDMXN has soared in reaction to the strong USD. That has taken the USDMXN to the all-time high of 25.4287 on March 24th.
Taking a broad look at the monthly chart above, the run to the upside came after bull flagging (well bull pennant -see green and red numbered circles). The run took the price to – and through – a topside trend line on the way to a high at 25.4287 last month. However, the price backed off. The break higher failed. Did the price go too far, too fast? Is the high in place?
That topside trend line comes in at 24.7100 currently (give or take). The high in the first two days of April has reached 24.6077 – below that level.
Technically, the simple rule for the bias off this chart is “stay below 24.7100 and there is hope for more downside probing. Move above and all bets are off that a top is in place”.
That trend line is a key barometer now and going forward until there is a better topside level (since the price is at all time highs).
Drilling to the daily chart below, there is a different view that gives a bullish tilt (or tempers the sellers hope).
Looking at the chart below, the run higher from the February low to the March high corrected lower and stalled at 22.8296. That was just above the 38.2% of that move higher at 22.7877.
The inability to break below that retracement level makes the correction of the plain-vanilla variety. It just is not all that impressive.
As a result, buyers have taken the price back higher toward that trend line resistance area from the monthly chart. It also stalled near recent swing highs/lows (see red numbered circles in the chart below) That is now between 24.5500 and 24.6400 currently. There is a limit to the upside.
Nevertheless, if the price can get above and stay above, it should solicit more buying (with the 24.7100 level from the monthly another upside target).
What we have learned – and defined – from the daily chart is that there is a ceiling above (topping at 24.6440), but a floor below at the 38.2% at 22.7877. Traders can lean against the high level, but will need a move below the 38.2% to give more downside confidence going forward.
The final look comes from drilling down to the hourly chart below.
The 24.5530 to 24.64402 swing area is more clearly seen (see yellow area in the chart below). There was only a single hourly bar from March 23 that moved outside that yellow area.
Today, the 100 and 200 hour MA have not done an ok job of defining intraday bias, but the last 4 days has seen moves above and below the MAs. The price action today moved below the lower 100 hour MA earlier in the session, but quickly failed. That has led to a move back higher.
If the price can stay above that 100 hour MA now, the tilt is higher. The swing high area may be tested once again.
A move below that MA (and the 38.2% at 23.81778 in the chart below) and the sellers are more in control. We could see a rotatation back toward the 38.2% retracement
SUMMARY. Admittedly, the focus has been on the major currencies and things like stocks and gold and crude oil of late.
However, after looking at the USDMXN, and drilling back from the monthly to the daily and to the hourly charts, there are some interesting, well defined technical levels that may give traders some low risk opportunities in a high risk environment, including:
- The failed break of the trend line from the monthly chart at 24.7100 area
- The 38.2% support at 22.7877 on the daily chart and the swing area at 24.5530 to 24.6440 on the daily chart
- The 100 hour MA on the hourly chart at 23.9143.
Those are the technical clues that define the range and bias for traders today and going forward.
If the upper levels can be broken (or support not broken), the bulls are still control.
If the resistance levels hold and the lower levels are broken, that is good news for those like my neighbor, who is looking to sell the USDMXN
Time will tell, but so will the price action.