EUR/MXN may be Ready to Reverse
|With the ECB cutting rates and surprising the markets with the more dovish QE announcement, one would expect EUR pairs to be near their lows. However roughly a half hour after the EUR selloff, many of the EUR pairs reversed and went bid. The EUR/USD was one of those pairs that reversed, which caused DXY to also reverse back to levels prior to the announcement. Therefore, many EUR and USD pairs put in reversal candles on daily timeframes:
EUR/USD
EUR/NZD
However, none seemed to have had quite as large of a possible reversal signal as the EUR/MXN, which put in a hammer near the bottom of the 2019 trading range on a daily timeframe.
The pair has been trading in a falling wedge for the last week, as seen on a 240 min timeframe. Today, the pair put in a false breakdown into a support zone. It then proceeded to bounce out of the support area and test the upper end of the falling wedge.
If the hammer on the daily is any indication of a potential reversal, EUR/MXN may be ready to break out of the wedge. The target for the breakout of a wedge is a 100% retracement of the entire wedge, which is 21.82. First resistance comes in at 21.59 (horizontal resistance). First support is today’s lows at 21.45. Below that, support is the horizontal channel line at 21.07.
Data for Europe and Mexico is light tomorrow. Pending any unexpected headlines or tweets, EUR/MXN many continue to trade off technicals into the weekend.
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