USDMXN – Weekly Outlook – January 9 2021

Last Updated on January 9, 2021

USDMXN Forecast – January 9 2021

Introduction

Entering into the first quarter of 2021, we start to notice a comeback for the Greenback on  best US binary options broker platforms, even in the face of coronavirus pandemic, recent Capitol chaos, and possible effects of Joe Biden administration.

Should we expect a prolonged downward slide of the USDMXN exchange rate, or are we at the start of a trend reversal? Read on for more insights into the technical and essential news releases for the pair.

US and Mexico News

The recent political atmosphere in the US registers a slump in the US dollar as Democrats take the US Senate lead, resulting in a rise in demand for Latin American currencies.

The MXN Peso increased in response to rising oil prices on Wednesday. The USDMXN attained a 1% increase vs. the USD, a move after a substantial voluntary production by Saudi Arabia that saw oil prices strike an Eleven (11) month high.

Following a Democrat victory in one of the US Senate (in Georgia), the USD and US Stock futures corrected their gains. The win will allow Joe Biden, President-elect of the United States, to execute his plan.

The plans will include higher corporate taxes and an increase in stimulus measures—both likelihoods way negatively on the USD and the US technology stocks.

Reuters’ recent report shows that the largest economy in Latin America joins the worst affected by the Coronavirus. The nation races to acquire vaccines as the infection rate increases.

According to the emerging market debt manager Alejandro Arevalo of Jupiter Asset Management, there is a higher likelihood of the US government issuing more debt because of big infrastructure spending and blue wave.

BlueBay Asset Management’s head of emerging markets stated that capital is shifting out of the US and into the rest of the world, following the negative rates as a critical driving indicator of EM risk assets.

On Monday, data released by the US CFTC shows an increase in speculative short sell positions on the USD. Compared to 30.15 billion USD net-short some weeks ago, the net-short USD position increased to 30.40 billion USD in the last week of 2020.

The Mexican Peso recorded 500,000 pesos in Net dollar long by -0.205 USD, 5382753323 in Week-Long, and 6033357742 in Short.

USDMXN Technical Analysis

Monthly (MN) Chart: Bearish and Bottoming

Monthly Chart of USDMXN (Tradingview) - January 9 2021

The USDMXN slumped into the RSI oversold area, following a bullish-Acc support collapse on August 03 ’20 (23.2710).

The bearish descent should continue now that the pair trades in the oversold area and breach the MA10 and MA20 area.

Weekly Chart of USDMXN (Tradingview) - January 8 2021

Similarly, a hidden bearish divergence pattern formed on the weekly-TF confirmed the dead cross of the fast MA10 and slow MA20, as the USDMXN used both Moving Averages as resistance.

Daily Time Frame Projections: Bearish and ranging

Daily Chart of USDMXN (Tradingview) - January 8 2021

Daily Resistance Levels: 21.98123, 21.4860, 21.13613, 19.93528

Daily Support Levels: 19.61065

The collapse of bullish-Acc support on October 29, ’20, emphasized the price correction and continuation of the downtrend. 

The second break of bullish-Acc support is in place, and we anticipate a continuation of the bearish move on the daily time frame. However, the buildup of bullish divergence on the higher monthly and weekly time frames of the USD Index may give strength to the USD.

Conclusion

The NASDAQ Mexico Index and the Mexico Fund Inc show a stable Mexican Peso from April 2020 to date. We may expect a slowing of the rise, considering the reversal chart patterns on the US Index. Conversely, policies from the newly elect democrat party may bring a prolonged weakness to the Greenback.  

Advancing into Q1 2020, we should expect significant volatility in the USDMXN exchange rate.

James S. Martin
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