The US dollar is going back and forth during the trading session on Friday against the Mexican peso as we continue to see a lot of noise.
Ultimately, I look then at the 50-day EMA as a potential barrier that if we get anywhere near it, I will short it.
This is a classic interest rate differential play, as the swap is strong to the downside.
The USD/MXN market right now has been very choppy and very questioning, if you will, of where to go next because although the interest rates do favor Mexico, we still have a lot of concerns out there when it comes to the idea of risk appetite.
With this, the market is, I believe, not only looking at the 50-day EMA as a barrier but also possibly the 17.50 level. Anything above could have this market looking towards the 200-day EMA, but I also recognize that signs of exhaustion probably get sold into, and that is what I am looking to do here.
Market Outlook and Strategy
The market isn't necessarily one that I am expecting the market to see an absolute fallout through the bottom. I think it is just more of a fade the short-term rally type of situation, perhaps down to the 17.18 level. Underneath there, we could go looking at the 17 level, which I do think is a very hard floor.
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All things being equal, I am negative on this market, but I am not aggressively so. I think this is a short-term scenario where you're just kind of fading signs of exhaustion as they occur.
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