Short setup in the Mexican peso

In the three days after the election of Donald Trump as the US President, the Mexican peso lost over 15 percent. Then, after a renewed low, the panic was over for the time being in January of this year, and the peso reclaimed almost the entire panic sell-off.

After a fairly large long positioning of the commercial hedgers (the Commercials) gave the starting signal for the 12-week upward correction in January, the positioning has now reversed completely. Last week, the Commercials held only 6,807 net long contracts, in comparison to 73,939 contracts in January before the start of the correction.

This suggests that this correction may now have come to an end. Making it additionally difficult for the upward trend is the fact that the open interest has also taken on a rather extreme value. Mid-term highs in the market often coincide with a large open interest.

In the daily chart, it can clearly be seen how cleanly the last correction transitioned into the upward trend. The first indications that we could now really be looking at the end of the correction have already been created by the breaking of the magenta trend line and by the undercutting of the previous week’s low. Both levels were taken out of the market by the strong momentum candle from April 19th. I see a good probability for further falling prices quoted in the next few days and weeks.

There is space for a first run-up until at least the old high at 0.05140 (green line in the chart). In the mid-term, I also consider a test of the level just above 0.050 likely (green support zone in the chart).
In the 4-hour chart, an entry is available if the price breaks out from the current triangle and undercuts the last course low. If a correction movement occurs before then, the level at 0.053 is a suitable resistance zone for the beginning of a short position.

As always, I wish you continued successful trading!

Source of charts: Trading software "AgenaTrader"