USDMXN – Weekly Outlook – December 3 2020

Last Updated on December 3, 2020

USDMXN Forecast – December 3, 2020

Introduction

The (MXN) Mexican Peso has maintained a positive outlook since the Coronavirus breakout and into the US presidential election, as revealed Race Options broker.

Should we expect a continuation of this move?

Let’s see what the charts say after going over some key events in both nations.

US and Mexico News

The US Thanksgiving holiday came with a slowing of the financial markets.

The USDMXN made a slight price correction following a trade surplus posted by Mexico in October. Also, the Peso outperforms its peers within the same region owing to considerable more stable economic trends and speculations of improvement in US and Mexico trade relationships.

Investors and traders watch for alleged Mexican central bank actions on the interest rate.

Mexico records a 4% increase in consumer price inflation over the last months. Also, the (MXX) Mexican stock slumped by 0.8% as traders lookout for possible weekly gains.

USDMXN Technical Analysis

Monthly Chart Direction: Bearish Bottoming

Monthly Chart of USDMXN (Tradingview) - December 4 2020

Monthly Resistance Levels: 21.4590, 20.83770

Monthly Support Levels: 19.6848, 19.02660

An apparent collapse of the 23.271 accumulation of buy orders on May ’20, erasing the roughly 30% USD gains from the February ’20 low.

November price close below the MA-20 shows that we may be coming to an end of the 22.5% price correction and move into a price rally to favor the USD.

An exit of the RSI oversold area, which is also likely to form a hidden bullish divergence, should confirm the price bottoming going forward into Q1 2021.

Weekly Chart

Weekly Chart of USDMXN (Tradingview) - December 4 2020

Weekly Resistance Levels: 22.25535, 22.89923, 24.88885

Weekly Support Levels: 18.97683, 20.03381

Similar to the monthly time frame of the USDMXN, the weekly chart also signaled a breach of accumulation support zone on 27 July ’20, which lead to a roughly 10% gain for the Mexican Peso.

After the USDMXN closed above the MA-20, a re-entry was triggered and now losing steam to a regular bullish divergence at press time.

Daily Time Frame Projections: Bearish Slowing

Daily Chart of USDMXN (Tradingview) - December 4 2020

Daily Resistance Levels: 20.84833, 21.12130, 21.49836, 22.15105, 22.69940

Daily Support Levels: 19.94817

The daily time frame also signaled a price slump of the bullish support (22.15105), confirming the upper weekly time horizon’s re-entry point.

Today marking the first day in December, the USDMXN flags a regular bullish divergence, just like the weekly time frame.

4HR Time Frame

H4 Chart of USDMXN (Tradingview) - December 4 2020

Bearish divergence on 03 November ’20 21:00 shows a (-6.9%) decline in the USDMXN exchange rates.

An entry of the RSI Level-80 and a golden cross of the MA-10 and MA-20 may support the Greenback’s bullish recovery.

Bullish Scenario:

Following our analysis above and a transition in leadership in the United States, we should expect a strong recovery in the US dollar compared to the Mexican Peso.

A new US government administration, alongside improvement in coronavirus vaccine, may recover the US economy, considering the blow dealt by the global lockdown.

Bearish Scenario:

Although we hold a long term bullish opinion on the USDMXN, traders can also look out for short term shorting opportunities with lower holding time on the 4hr time frame. An exit of the overbought area may be a good entry signal.

Conclusion

Though the Mexican government is on the lookout for a positive relationship with the incoming Biden administration, that doesn’t still confirm a sustained strengthening of the Peso against the Greenback in the long term.

Signs of a regular bullish divergence on the higher weekly TF of the USD Index shows a likely recovery in the US economy against other paired currencies.

James S. Martin
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