Page title / meta title USD/MXN: What Is Behind the Peso’s Sudden Shift?
Metadescription USD/MXN has moved sharply higher as dollar strength and risk concerns reshape sentiment. Key levels and risks to watch.
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Day traders need to take a look across the broad Forex market and understand the conditions being battled and wagered upon are correlating to broad market sentiment. The USD/MXN has seen a lift off occur the past handful of day as global assets and outlooks react to an environment not all investors, nor large players, are comfortable. The market opening for the USD/MXN this morning has been relatively calm, but as bigger volumes comes into the currency pair when North America starts to churn should be expected to produce additional volatility.
Why Broader Dollar Strength Is Supporting USD/MXN
USD centric strength has been dominant in Forex the past handful of days and this has happened as the U.S government bond market has ignited with higher interest rates. While technical traders may be bored with the details, the evidence of a stronger USD can be seen across the broad Forex landscape. Traders who believe the USD/MXN needs to and must return to its bearish stance must be willing to accept the new reality which has developed the past week.
Financial institutions are definitely shifting their mid-term outlooks as evidence from the U.S bond market via higher yields is causing turmoil. The effect of higher interest rates being able to be received from U.S bonds has equated into a stronger USD for the moment. This doesn’t mean the situation will continue to produce the same results every day, but day traders need to beware and make sure bias against the USD doesn’t distort their perspectives based on what is happening now.
USD/MXN Price Action Signals a Break from Its Bearish Trend
The USD/MXN is situated near the 17.74600 mark as of this writing depending on the bids and asks. Trading appears to be picking up speed and highs are being sustained. The USD/MXN which waved goodbye to the 17.00000 level on the 14th of September has seen a steady climb upwards. Velocity has been part of the formula certainly, but also providing powerful proof that a change of sentiment has taken place is the sustained buying action.
While reversals have certainly occurred intraday, the ability of the USD/MXN to seemingly be hammered by doses of impetus upwards as the broad Forex market becomes more nervous is clearly demonstrated via technical charts. The USD/MXN in the past few sessions has been mustering solid steps higher and suddenly is challenging values not seen since April of this year. The consistent bearish trend which was seen from late July until the 14th of September has been destroyed for the moment.
Rising Yields and Inflation Concerns Are Shaping Sentiment
The USD/MXN is in a strong buying flurry. The sustained elevated values of WTI Crude Oil within sight of the $100.00 is creating legitimate concerns that inflation will remain problematic over the mid-term – at least until there is change in the Middle East situation which remains anxious. The U.S Federal Reserve’s interest rate hike on the 16th did not help the U.S government bond market.
Investors are clearly nervous about the mid-term regarding what their assets will do. While Wall Street has not suffered a selling attack as of yet, sentiment is clearly jittery and this is producing the rise in U.S bond yields. The USD/MXN may look too high to many retail traders, but for the moment the trend cannot be denied.
USD/MXN Price Chart
Why a Quick USD/MXN Reversal May Remain Difficult
For a bearish track to develop again in the USD/MXN a positive dose of sentiment will have to come into the marketplace. Certainly at some point financial institutions may decide the Mexican Peso has lost too much value to the USD, but day traders who want to bet on lower price action need to remain careful and should probably not get too overly ambitious. Yes, reversals will be seen, but how long can they be sustained in the current market conditions?
USD/MXN Faces a Test of Whether Momentum Can Hold
The rapid climb of the USD/MXN is showing an obvious amount of fear and this has correlated to the broad Forex market. The velocity upwards does open the door to the potential that large players will start to calm down soon as they adjust their reactions and believe the marketplace has overreacted. This could lead to choppy conditions short and near-term as perspectives are considered regarding the trading conditions seen the past few days in Forex and create some selling. Day traders need to monitor the USD/MXN carefully.
USD/MXN Levels to Watch
USD/MXN is trading near 17.7460, with the recent move higher keeping attention on whether buyers can sustain momentum.
- Immediate resistance: 17.7510
- Higher resistance area: 17.8200
- Initial support: 17.7405
- Lower support area: 17.7260
A sustained move above 17.7510 would keep the recent upside pressure in focus, while a move back below 17.7405 could suggest that the pair is entering a more two-sided consolidation phase. The response around these levels may offer a clearer indication of whether the shift in sentiment is holding or beginning to lose momentum.
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