USDMXN – Weekly Outlook – December 15 2020

Last Updated on December 15, 2020

USDMXN Forecast – December 15, 2020

Introduction

Last month, more volatile currencies like the Mexican Peso see an increase in value against the USD on binary options broker sites, as progress in COVID-19 vaccines restored hope. However, we may see a change in polarity, considering that the first distribution will be in the US, giving the nation a head start against others.

US and Mexico News

The ISHARES INC MSCI Mexico ETF (EWW) exits the oversold area from the monthly charts on May 01, 2020, and has gained about 74.0% from the March 02 low.

We expect a slowing in the price rally and a likely decline in the first quarter of 2021.

Similarly, the Mexico Equity and Income Fund (MXE) breaks above a bullish closing inside bar candlestick on April 01 ’20 for a 66.7% gain from the June 01, 2020 low.

It’s been a positive year for the Mexican Peso; however, we may see a general decline in the coming year.

Wall Street recorded a higher opening price on Monday following a rise in travel-related stocks on the distribution of coronavirus vaccines across the United States. 

The US dollar, viewed from the USD Index DXY, was down 0.24% at press time after an early slump to 90.419, a low price last seen in 20

According to Reuters and CFTC data release, the USD net-short positions increased last week, from later September. 

This week, however, traders and investors will be on the lookout for a central bank and US Fed meeting on Wednesday, December 16, 2020.

USDMXN  Technical Analysis

Monthly Chart Direction: Bearish Bottoming

Monthly Chart of USDMXN (Tradingview) - December 14 2020

Breaking below the 23.27100 buyers’ support, the USDMXN resolved to a price correction that pierced through both MA20 and MA10 and into the oversold area last month (November).

As the exchange rate now trades below the MA20 and directly into the oversold area of the Relative Strength Index (4, close), we are optimistic of a resumption of the bullish trend.

However, the RSI will have to exit level-30 as confirmation of our anticipated up move.

Daily Time Frame Projections: Bullish Start

Weekly Chart of USDMXN (Tradingview) - December 14 2020

Resistance Levels: 21.49836, 21.12

Daily Support Levels: 19.91163

Now, let’s consider the daily chart illustration above.

After exiting the overbought area on October 30, 2020, and entering the oversold zone on November 05, 2020, the daily chart confirmed a bearish trend.

Notice that the pair did not enter the overbought area until December 07, 2020, where it confirmed the start of a bullish trend.

Our bias is currently switched to bullish, considering the current state of the daily time frame. 

We look out for price correction towards the MA20. However, suppose the price momentum forces the RSI back below the oversold area. In that case, our bullish bias is skewered, and we’ll have to re-evaluate our position and possibly exit our trades in a loss. 

If everything goes according to our analysis, we look to stack up on the correction zones trend.

Conclusion

With all the Mexican Indexes in the overbought area and the USDMXN getting set to confirm a hidden bullish divergence on the monthly time frame, we anticipate a strong comeback for the Greenback into Q1 2021. We might even see part of the bullish move play out this week and into the end of 2020.

 

James S. Martin
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