Talking Points
- USD/MXN break multi-month trendline
- Reaction around September high in focus
USD/MXN: Big Break Ahead?
USD/MXN came to life this week as it broke above a trendline connecting the September and November highs. This could easily be construed as a breakout from a multi-month consolidation within a longstanding uptrend so it needs to be monitored closely. Given the important timing relationships surrounding the high that occurred in late September, I really need to see 17.3400 overcome in order to get excited about the prospects of another impulsive move higher developing in USD/MXN.
Now I have been admittedly cautious on USD/MXN since the start of the 4th quarter as the cycle turn window around the end of 3Q raised the possibility of a deeper correction in the exchange rate. Despite plenty of opportunities, this weakness never really surfaced which presumably highlights the strength of the underlying trend. As I have stated in prior notes, the more interesting move for me would be a break of 17.3400, as it would invalidate the timing resistance. Breaks of time resistance often times are aggressive. This looks a lot more likely now following the action of the past few days, but we are not out of the woods just yet. A failure sub 17.3400 days followed by a break of 16.3200 would turn focus back to the downside.
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