USD/MXN traded higher yesterday, but during the European morning today, it hit resistance slightly above the round figure of 20.000 and pulled back down. Overall, the rate continues to trade above the upside support line drawn from the low of July 31st and thus, we would consider the short-term outlook to be positive for now.
Another attempt above 20.000 may encourage the bulls to target again Monday’s peak, at around 20.120, and if they prove strong enough to overcome it, then we may see them challenging the 20.180 zone, which acted as a decent resistance back on December 18th and 19th. That said, before the next positive leg, we see the case for the current setback to continue for a while more, perhaps for the rate to challenge the 19.880 zone, or the aforementioned upside line.
That view is also supported by our short-term momentum indicators. The RSI stands above 50, but it has just hit resistance slightly below 70 and turned down, while the MACD, although positive, lies below its trigger line and points down as well.
In order to start examining whether the bears have gained the upper hand, we would like to see a clear and decisive dip below 19.755. Such a dip would also confirm the break below the upside support line taken from the low of July 31st, and may initially aim for the 19.650 zone, near the low of August 21st. Another break, below 19.650, could extend the slide towards the low of August 16th, at around 19.520.
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