(MENAFN- Daily Forex)

• The US dollar did try to rally against the Mexican peso in the early hours of Thursday trading, but continues to see downward pressure.
• All things being equal, the market has been in a strong downtrend for quite some time and appears to be trying to determine whether it can truly break down.

Resistance has Been Strong

Recently, price tested the 50-day EMA just a couple of sessions ago near the crucial 18.50 level, an area that continues to be important going forward. This area had previously been support and now seems to be offering resistance. The interest rate differential favors the Mexican peso, so that is something to pay attention to as well. Between the 50-day EMA, the 18.50 level, and the interest rate differential, the pair appears likely to continue dropping.

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Keep in mind that although the US dollar is much stronger than most other currencies, this situation is different because the Mexican economy is highly dependent on exports to the United States. The Mexican economy actually strengthens when the United States strengthens. US demand still looks firm, and with Mexico being the world's largest exporter to the United States, the peso tends to appreciate as the US strengthens. When the US weakens, investors run to safety, and the US dollar benefits.

EURUSD Chart by TradingView

All things being equal, this looks like a steady grind to the downside, and short-term rallies continue to offer selling opportunities. This isn't a pair that I am looking for buying opportunities at the moment, as it would take a serious downturn in risk appetite to facilitate this kind of move.

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