So, yesterday the closely watched FOMC meeting and rate announcement came with its share of surprises. No one thought that Yellen and FOMC members were going to brush off the recent week economic data and particularly the below par GDP reading recorded in the first quarter. Yellen actually fanned the expectation of a rate hike in July and a further increment in December after saying that growth is expected to bounce back and economic activity will resume to normal in the coming months. This by itself is expected to be the driver and with quantitative tightening scheduled for Q1 2018, it’s safe to be a USD bull. Today, I won’t expect too much volatility with USD pairs and the only thing that is to watch out is the NFP data to be released tomorrow where it is imperative to watch average hourly earnings. If it does increase, it will be the beginning of a ride up for the greenback.
Today, we look at the USDMXN. Technical pointers are indicating a likelihood of USD appreciation in the coming weeks. Looking at the charts, last month’s candlestick closed higher at 19.34 while bouncing off at 18.47. If you paste a Fibonacci tool from last month’s hi-lo, then price action is reversing at 23.6% Fibonacci level. From historical observation, price will likely trend higher towards the 100% level before encountering resistance and correct. So, this then already sets our stop loss and takes profit targets. Additionally, there is a buy signal printed by the stochastics though not in the oversold zones.
Trade as follows:
Stop Loss: 18.7
Take Profit: 19.4
Have a good trading day.