USD/MXN traded lower on Monday, after it hit resistance near the crossroads of the 19.085 level and downtrend line drawn from the high of December 3rd. Although since December 12th the rate has been trading in an indecisive manner between 18.980 and 19.085, as long as it stays below the downtrend line, we would consider the short-term outlook to be negative.
A clear and decisive break below 18.980 would confirm a forthcoming lower low and may trigger declines towards the 18.880 territory, marked by the low of July 9th. If the bears are strong enough to overcome that zone as well, then we could see them setting the stage for the 18.800 hurdle, which is fractionally above the low of May 1st.
Shifting attention to our short-term oscillators, we see that the RSI, already below 50, has turned down again, while the MACD, although above its trigger line, lies within its negative territory and shows signs that it could turn down again. Both indicators detect negative momentum and support the notion for USD/MXN to continue trading in a downtrend mode.
On the upside, we would like to see a break above 19.135 before we start examining the case of a short-term bullish reversal. The rate would already be above the pre-mentioned downtrend line and the bulls may get encouraged to drive it towards the 19.200 zone, marked by the inside swing low of December 10th. Another break, above 19.200, may extend the advance towards the 19.290 area, which is slightly above the peak of December 11th.
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