USD/MXN Price Analysis: Downside looks inevitable below 18.40

The USD/MXN pair has retreated after facing barricades around 18.45 in the Asian session. The downside bias for the asset is the outcome of a subdued performance by the US Dollar Index (DXY). The USD Index has refreshed its intraday low below 103.00 as investors are anticipating that the Federal Reserve (Fed) won’t go heavy on interest rates for now amid escalating United States recession fears.

US banks are expected to behave extremely precautionary while disbursing advances to households and businesses after the turmoil in order to justify fresh regulations. Therefore, extreme credit conditions by lenders would slow down overall economic activity and henceforth the overall demand.

Meanwhile, S&P500 futures have extended gains in the Asian session on hopes that expanded emergency lending facility to US banks will provide support to them, portraying a higher risk appetite of market participants.

USD/MXN is hovering near the 61.8% Fibonacci retracement (plotted from near March 09 low at 17.90 to March 20 high at 19.23) at 18.40. The retracement level also acted as a cushion for the pair last week. The major is consolidating below the 50-period Exponential Moving Average (EMA) at around 18.50, which indicates that the short-term bias is favoring the downside.

Meanwhile, the Relative Strength Index (RSI) (14) has slipped into the bearish range of 20.00-40.00, which indicates that the bearish momentum has been activated.

Going forward, a slippage below March 22 low at 18.43 would drag the asset toward March 13 low at 18.24 followed by March 09 low at 17.90.

Alternatively, a break above March 24 high at 18.00 will expose the asset to a 23.6% Fibo retracement at 18.92 and March 20 high at 19.23.

USD/MXN hourly chart