USDMXN – Weekly Outlook- August 8 2019

USDMXN Outlook & Technical Analysis for US Binary Options

Introduction

This week came with bullish optimism in favor of the USD and bearish sentiment for the Mexican Peso on US binary options brokers following a release of macroeconomic data as well as validation from chart patterns.

Fundamentals: Mexican PESO

Mexico – GDP

Mexico’s GDP- Gross Domestic Product was released at -0.7%, a value way lower than the previous value that was at 1.2%.

As the most significant indicator of economic health, it is a gauge of variation in annual adjusted inflation value of services and goods that comes out of the Mexican economy. The most recent GDP reading on July 31 ’19 shows bearish sentiment for the MXN, which we’ll later see on the price charts.

 USD NEWS

The United States Fed Funds Rate

The United States Federal Funds rate is the interest rate that banks or credit unions (depositary institutions) loan money to one another. The FOMC decides the Fed Funds rate. Board members of the FOMC come to a consensus on where to set the benchmark.

The Fed funds rate benchmark is a strong indicator of the strength of the economy, and traders watch these changes closely to make decisions.

When the rate is more leading than expected, it shows a positive sentiment for the Greenback, while a lower than expected rate is considered bearish for the USD.

During its last meeting, the FOMC lowered the target range for the federal funds rate to 2.25%.

Latest data shows actual, consensus, and forecast reading at 2.25%, while the previous reading was pegged at 2.5%, indicating a bearish sentiment for the USD.

USDMXN Technical

USDMXN: Monthly Chart

USDMXN Monthly Chart - August 8 2019

Monthly price swings of the USDMXN shows the price enclosed in an ascending triangle.

First was a rejection of buying pressure on January 01 ’19, with resistance established at 19.88062, followed by an accumulation of buyers (18.40458) on March 01 ’19, and break of resistance on August 01 ‘19.

USDMXN: Weekly Chart

USDMXN Weekly Chart - August 8 2019

Notice the transition from bearish to bullish sentiment on July 22 after an earlier breakdown of bullish support on June 10 ’19.

The rejection of sell pressure (18.86446) on July 08 ’19 and the accumulation of buyers (18.96240) on July 22 ’19 led to the current 3.6% surge in price.

USDMXN: Daily Chart

USDMXN Daily Chart - August 8 2019

We move down to the daily chart where the bulls move the dollar to pesos exchange rate from a range into an increase in buying pressure on July 30 and 31 ’19 and setting sound support at 19.01810, and 18.95004 respectively. The exchange rate of the Mexican Peso increased by roughly 3.0% from the engulfing formation.

USDMXN: 4HR Chart

Close to the intraday time horizon, the 4hour time frame also supported the bullish campaign as the pair signaled a regular bullish divergence pattern on July 31 ’19 12:00, with significant support at 18.95004.

Conclusion

The current overbought nature of the USDMXN suggests profit-taking opportunities as the exchange rate comes within the range of the June 03 ’19 resistance (19.88062).

If the price fails to move beyond the June 03 ’19 resistance, and the RSI makes a higher high, we may as well prepare for a hidden bearish divergence setup.

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