(MENAFN- Daily Forex)
US dollar continues to drop against Mexican peso. At this point in time, the market is testing a major support region which extends all the way down to the 16 level. The 16 level is an area that I think if we break down below, the dollar's going to collapse against the peso.
This is interesting mainly due to the fact that the US dollar is fairly strong against most currencies. But the peso is a different story, and that is because of the massive interest rate differential between Mexico and the United States. Keep in mind that the Mexicans are just shy of 12%, and that will continue to put pressure upwards on the peso or downwards in this
USD/MXN pair.
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If we break down below $16 on the chart, it is a major support level on the
monthly chart
and that could lead to massive selling. Furthermore, one thing to keep in mind about Mexico is that investment from the United States is pouring into that country because, the Americans want to stop doing business with the Chinese, or at least come as close as possible to it.
It's much easier to send goods from Mexico than it is from China. And then of course, the national security issues all come into play as well. So, with that being the case, we may very well see a breakdown . It doesn't mean, though, that it would be easy, and it doesn't mean that it will be brutal or sudden. At this point in time, we are in such a heavy downtrend though.
I look at any rally as a potential selling opportunity , which is kind of rare when I think about the US dollar in general. The 50 day EMA above is sitting at roughly 16.9, and I think that your major resistance in the short term, as far as buying is concerned, the one thing that could send the dollar screaming higher against the peso would be some type of serious economic concern, because in times of economic uncertainty, people favor the dollar.
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