General market sentiment has been anti-USD and that is something that has been on the tunnels for a while now. Consumer spending fell year over year from 2.7% to 2.4%, wages stagnated from March data while the general employment situation was no better last month. Despite all of this, unemployment rate fell down to 4.7% and is expected to bounce. I won’t reiterate political gimmicks at play right now because we have covered that enough. Theresa May unexpected call for a snap election was just an example of how markets can quickly swing. Remember there was no major economic release but her comments caused the GBP to appreciate and in the process breaking through some important resistances. Mnuchin on the other hand is trying to play down on Trump’s strong USD rhetoric. According to him, there is a big difference between talking and acting and President Trump was actually spilling out some truth about the USD strength and its impact to US businesses. In the meantime, the USD appreciated following his comments despite the weaker data streaming in from the US.
In this line therefore, let’s look at the USDMXN. Trump took power and the Mexican Peso tanked, Mexico’s Central Bank hiked rate and intervened, it stabilized and for the third straight month, the Peso has been on the driving seat. Technicals indicate a swift end to this at least from what is evident from the chart. First of all, notice that classic reversal pattern with the way price action is bouncing from the lower BB. Secondly, the resistance trend line drawn from January’s high was strong broken through yesterday with an oversold stochastics which printed a buy signal. Further, as price action trended lower, stochastics swung higher pointing to a bullish divergence and that is what happened. I will expect a continuation and a consequent confirmation of this candlestick reversal pattern today. It is for this reason that I will trade as follows:
Stop Loss: 18.39
Take Profit: 20.14-21.98-on the upper side which is January’s highs and on the lows, bottoms of Dec 2016
For intra-day trade as follows:
Buy Limit: 18.6940-18.73
Stop Loss: 18.6400-Below 23.6% Fibonacci from today’s Hi-Lo
Take Profit: 19.1000-This is at 161.8-Fibonacci extension level.
Have a good trading day.