The technical picture of USD/MXN on our daily chart shows that the pair continues to trade below a short-term downside resistance line drawn from the high of October 12th. However, recently, the slide was halted in the area between the 20.307 and 20.317 levels, which mark the lows of October 18th and 15th respectively. Although the short-term trend is still to the downside, we will take a cautiously-bearish stance now and wait for a break below that support area, in order to get comfortable with further declines.
If, eventually, that drop happens, this move would confirm a forthcoming lower low, potentially opening the door for a move to the 20.202 hurdle, marked by the high of September 20th, where a temporary hold-up may occur. USD/MXN could rebound somewhat, but if the aforementioned downside line continues to provide resistance, the sellers might take advantage of the higher rate and push it down again. If so, the pair could make its way back to the 20.202 obstacle, a break of which may lead to a test of the 20.078 level, marked by an intraday swing low of September 27th.
Despite pointing slightly to the upside, the RSI and the MACD are still showing negative price momentum, which supports the above-discussed scenario. The RSI is below 50 and the MACD is below zero, although fractionally above the trigger line.
Alternatively, if the previously discussed downside line breaks and the rate rises above the 20.433 barrier, marked by the current highest point of today, that may attract a few more buyers into the game. If so, USD/MXN might travel to the 20.495 obstacle, or to the 20.595 zone, which is the high of October 15th. If the buying doesn’t stop there, the next possible target could be at 20.660, which is the high of October 14th.
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