USD/MXN down 0.95% on the day; Banxico's $20 billion peso FX hedges hurt dollar

Jose Ricaurte Jaen Analista independiente

Currently, USD/MXN is trading at 20.16, down -0.95% or (1967)-pips on the day, having posted a daily high at 20.48 and low at 20.08.

Today's NA session went 'business as usual' until Banxico hit the wires as market sources indicate the central bank is going to offer $20 billion in FX hedges. The Mexican peso appreciated as fast as 'The Flash' about 1% dragging the US dollar below the critical support at the 100-DMA. If prices close and open below such level, then the exotic currency could move lower towards 19.71.

Federal Reserve's Harker, bullish and hawkish, dollar drifts

Historical data available for traders and investors indicates during the last 8-weeks that USD/MXN, a commodity-linked and exotic currency, had the best trading day at +1.83% (Jan.10) or 3983-pips, and the worst at -2.22% (Jan.25) or (4684)-pips. Furthermore, the US 10yr treasury yields have a trading range 2.41% to 2.45%, up +0.59% on the day or +0.0143.

Technical levels to watch

In terms of technical levels, upside barriers are aligned at 20.87 (50-DMA), then at 21.38 (high Jan.27) and above that at 21.58 (high Jan.25). While supports are aligned at 20.24 (low Feb.10), later at 19.72 (low Nov.10) and below that at 19.11 (low Nov.3). On the other hand, Stochastic Oscillator (5,3,3) seems to shift direction to head south, but 'extreme attention' over US Treasuries to avoid a market trap. Therefore, there is evidence to expect further Mexican Peso gains in the near term.

On the medium-term view, if 22.03 (high Jan.15) is in fact, the top during the first semester in 2017, then traders and investors would have allocated risk around the following support levels: 20.28 (low Jan.29), then at 19.87 (short-term 61.8% Fib) and finally below that at 19.19 (short-term 50.0% Fib) . On the other hand, upside barriers are aligned at 20.92 (high Jan.29), later at 21.09 (high Nov.12) and above that at 21.58 (high Jan.22).

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Author

Jose Ricaurte Jaen

Analista independiente

Born in Colón (Panamá). Over the last years, he has been designing currency algorithms for the retail industry.

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