(MENAFN- Daily Forex)

• The US dollar rallied on Thursday against the Mexican peso to test the 18.50 level again, an area that has been important going all the way back to the beginning of July.
• This area, what once was support now acting as resistance, shows pretty significant market memory.
• It is also backed up by the 50 day EMA, which sits at the 18.57 level and is dropping.

This is a very interesting place in the chart because not only do we have that, but we also have the downtrend line that a lot of people will be following. The interest rate differential favors Mexico and that will continue to be the case. But if there are concerns out there about the global economy, the US dollar is a safety currency, and that would be the one thing that would really send this market higher.

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The 50 day EMA and the trendline both offer resistance, and therefore I think you're probably looking at fading short-term rallies that show signs of exhaustion. The 18.20 level is the short-term floor. Breaking that opens up the possibility of going down to the 18.20 pesos level, we are in a downtrend. I don't want to fight it, but it is worth noting that the us dollar is fighting almost everything right now and holding its own. Take a look at the Euro, the Canadian dollar, the British pound, et cetera. So, with all of that being said, if there is a flight to safety, this is going to be a very interesting market to take a long position in.

As things stand right now, from a technical analysis standpoint, you're still looking to fade these rallies. And it is worth noting at the end of the session, we are giving a little bit back. So, we'll have to see how this plays out. If we can close above that 50 day EMA though, we might have a run towards 18.9, maybe even 19 pesos.

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EURUSD Chart by TradingView

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