USDMXN – Weekly Outlook – August 27 2020

At the time of this USDMXN forecast we can see that the bears are in total control of the market, and for the upcoming economy country, it’s been favorable for them in the finical market.

USDMXN Outlook & Technical Analysis

Introduction

Top global FX platforms such as Race Option shows the Mexican peso gaining against the U.S. dollar in the past weeks. 

The market reaction amid the coronavirus treatment is a welcome development for investors and traders because it will bring stability in the economy at large.

Fundamentals 

Mexico Fundamentals 

The Mexican Peso has been trading high in the past weeks as the oil prices kept rising, which profited for the currency after a tropical storm hit the coast of Mexico. The weak dollar was another boost for the Mexican peso.

However, the recent data on Mexico’s inflation rate showed an increase of 3.99% during the half of August 2020.

The Mexican central bank did cut the interest rate by 50 bps to that of 4 year low (4.5%), flagging an inflation rise in the year.

U.S. Fundamentals

Unemployment Claims

This report is gotten from the US department of labour and released from time to time (weekly). This report’s outcome helps to point the health of the country’s economy concerning consumer spending.

The information shows the number of new people who are filling in for unemployment claims for the first time during the previous week.

If the actual number of individuals is less than the forecast data, it is suitable for the U.S. dollar while it is bad for the currency when it is higher than the forecasted figure. 

The forecast figure is 1000K, while the previous number is 1106K.

USDMXN Technical Analysis

Monthly Chart

USDMXN Outlook - Monthly Chart - August 27, 2020

Monthly Resistance Levels:  23.2710, 25.77820. 

Monthly Support Levels: 21.4590,  18.64510, 18.40470, 20.00000

The Mexican Peso reversal started when the May candle closed bearish and engulfed April’s candle, showing a downtrend against the U.S. dollar.

A further push downward and a bearish closing of 01 July 2020 inside bar indicates more sellers are in the market amid the weak U.S. dollar.

Can the price of USDMXN close below the support or above the resistance?

A close below the 21.45900 support level of 01 June 2020 will expose the previous resistance levels turned support of 20.00000 and 19.68480. Should the bears fail to push lower than the zone, we will likely get a bounce to the upside from that level of 21.45900.

Weekly Chart

USDMXN Outlook - Weekly Chart - August 27, 2020

Weekly Resistance Levels: 24.88850, 25.78360,  23.00000, 24.00000,

Weekly Support Levels: 22.5607, 21.49303, 18.53999, 19.6848, 19.0266.

The regular bullish divergence of 24 February 2020 pushed the U.S. dollar gain against the Mexican peso for some weeks before the COVID-19 pandemic was at its peak. After the bullish trend dominance, the market ranged before the breakout of the ranging market.

On the weekly chart time frame, we can see that after the price of USDMXN rose from the low of 21.49303 as of the outcome of profitable news from the U.S. economic calendar that gave the bullish rise, the effect of the report was not strong enough to push USDMXN through the resistance zones of 24.00000 and 24.88850. 

However, the uncertainty between U.S. Democrats and the Trump administration, coupled with the effects of the second wave of the COVID-19 pandemic, did weaken the U.S. dollar.

The Pin bar candle (collapse of bullish accumulation support) of 22.5607 indicates the rejection of upside momentum and a reversal of the trend to the downside. The price respected that resistance zone and the sellers were able to push back the price to the current level of previous support.

USDMXN Mid-Term: Bearish 

Daily Time Frame

USDMXN Outlook - Daily Chart - August 27, 2020

Daily Resistance: 22.93318, 22.52510

Daily Support: 23.64406, 21.47879, 21.72288

The breakout of the Mexican peso below the support level of May 2020 (23.64456) pushed the currency down to the support level of 21.72288 before the bears lost their steam. 

Currently, the USDMXN has been ranging between the high of 23.19320 and low of 21.47879 for weeks. The resistance zone of 22.19320 rejected the bull’s advancements to push back the price to 21.96299 towards the support zones.

As the bears push to close below, the support will mean that we shall see another bearish move to the south. However, if the support zone should hold, we may reject the price at that zone before the bulls push back the pair higher.

4Hour Time Frame

4Hour Resistance Levels: 22.90000, 22.239552, 22.38000, 22.49150

4Hour Support Levels: 21.94056, 22.41424 

The bull’s run resulted from useful data from the U.S. economy calendar that gave it an upward surge to the resistance levels of 22.90000 before it came crashing down to the rally starting zone.

After the market had ranged within 22.49150 resistance and 22.23952 support zone, the breakout below the support level gave the bears strength to push down the price in favor of Mexican peso because of the general weakness in the U.S. economy. We may see another possible breakout below the support levels of 21.94056.

Bullish Scenario:

A possible bullish scenario may happen on the H4 time frame should the support level rejects the bears’ pressure at that level of 21.94056.

Bearish Scenario:

On the daily chart, we had experienced a descending triangle breakout to the downside before, and another possible scenario is at about to happen on the daily time frame. 

If the Mexican peso can push lower than the 21.47879 and 21.7228 levels, we will see more sellers.

Conclusion

At the time of this report, we can see that the bears are in total control of the market, and for the upcoming economy country, it’s been favorable for them in the finical market.

If the U.S. jobless claims come out loud, we will likely see a more bullish surge from the support zones in the coming days of trading.

 

James is based in London ( United Kingdom )
He has been a professional trader for over 5 years.
Currently, he works as forex analyst for different investment companies, and also the main author at USBinaryOptions.com
James S. Martin

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