- USD/MXN was consolidated in the lower monthly regions mentioned earlier this week.
- The technical setup prefers to be a bearish dealer and supports the view of further losses.
- To disable negative distortion, sustained strength over 100 days of SMA is required.
The USD/MXN currency pair lacks clear intraday direction on Wednesday, fluctuating within a tight range of approximately 20.2790-20.2795 during the Asian session. Spot prices remain near their lowest levels since January 24, touched on Monday, and appear poised for further declines due to prevailing bearish sentiment surrounding the US Dollar (USD).
Market participants seem convinced that a slowdown in the US economy, driven by tariffs and signs of a cooling labor market, could push the Federal Reserve (Fed) to implement multiple interest rate cuts this year. This expectation has contributed to the USD’s recent weakness, bringing it to its lowest point since mid-October on Tuesday. However, traders are hesitant to place fresh bearish bets on the USD ahead of the release of US consumer inflation data, which is providing some support for the USD/MXN pair.
From a technical standpoint, last week’s drop below the 100-day Simple Moving Average (SMA) for the first time since May 2024 strengthens the bearish outlook for USD/MXN. Additionally, momentum indicators on the daily chart are beginning to show increased downward traction, suggesting that the pair remains biased to the downside. Any intraday recovery is likely to face selling pressure near the 20.3825-20.3830 region, corresponding to the 100-day SMA breakdown point.
Conversely, a sustained move beyond the weekly peak at approximately 20.4040 could trigger short-covering, pushing USD/MXN toward 20.5040 and potentially higher to the next resistance zone around 20.6060-20.6070. If the upward momentum continues, the pair could target the 20.7035-20.7040 range before challenging the key psychological level of 21.0000.
On the downside, a break below 20.2540-20.2535 could lead to further declines toward the 20.1810 support level, representing Monday’s monthly low. Further weakness could test the year-to-date low near 20.1345, with additional downside targets at 20.0715 and the December 2024 swing low around 20.0215.
USD/MXN daily chart
