(MENAFN- Daily Forex) The US dollar briefly weakened against the Mexican peso before recovering, with the price stalling near 18.50 as resistance.

• Support at 18.25 remains crucial, while economic links and rate differentials continue to shape the pair's direction.

The US dollar fell during early trading on Monday but has turned around to show signs of life. The market is hanging around the 18.50 level, which is a large round, psychologically significant figure in an area that has been previously supported and now looks to be a bit resistant.

Top Forex Brokers1 Get Started 74% of retail CFD accounts lose money Support at 18.25 and Macro Drivers

The 50-day EMA hanging around here, of course, is a pretty significant technical signal, but all things being equal, this is a market that I think you need to watch very closely because we have seen a US dollar resurgence as of late, which might be a sign of trouble. However, keeping all of that in mind, the reality is that this pair does move a little bit differently than many others in the sense that the Mexican peso tends to gain as the US economy does better. After all, the Mexicans send a ton of their exports into the United States. Therefore, if their biggest customer, the United States, is doing fairly well, it helps their economy. The interest rate differential favors the Mexican peso, so that is something to keep in mind as well. But it is worth noting that we spent some serious time here trying to form some type of support near the 18.25 level. And so far, it has held quite nicely.

EURUSD Chart by TradingView

We have broken above and retested a downtrend line. So that's another sign that we may be turning back around. If we see real fear come back into the markets, the Mexican peso will definitely struggle against the US dollar because if everybody's running to the greenback, unless it's for good economic reasons, which it probably won't be at this juncture, the Mexican peso is going to get eviscerated. If we can turn around and drop below the 18.25 level, then I think you've got a situation where the US dollar drops to the 18 handle.

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