Rumors have been swirling for days that the United States-Mexico-Canada Agreement (USMCA) is just about finalized. The main issue that has been holding up the deal has been the issue of enforcement. Although nothing has been announced officially, USD/MXN appears to believe that something will be finalized over the next few days and possibly signed before Congress goes on recess.
As we have been discussing for months now, USD/MXN is nearing the apex of a symmetrical triangle and has been trying to break out on either side. However, every time price reaches one of the two trendlines of the triangle, price reverts and trades back within the range. Over the last week, the Mexican Peso has been strengthening on the possible USMCA deal and today pushed lower through the 200 Day Moving Average and closed at the long-term upward sloping trendline once again.
Source: Tradingview, City Index
Not only did price close at the daily upward sloping trending from May 2018 near 19.2100, but on a 240-minute chart, there is a shorter-term upward sloping trendline at that same level from the lows on October 28th. USD/MXN had previously moved to the 50% retracement level from the highs on August 29th to the lows on October 28th, and upon the rumors of the USMCA began to retreat towards the bottom trendline. If the trendline breaks, the pair can trade down to 19.0175 before it reaches the next level of support. Below there is a band of support between 18.8500 and 18.9500. Note that the RSI is in oversold territory, which indicates price may be ready for a bounce. First resistance 19.4277, which is the low from November 29th. Above that, resistance is back at previous highs near 19.6588. There is one more resistance level at 19.8522 before reaching the downward sloping trendline on the daily timeframe just shy of 20.00.
Source: Tradingview, City Index
Watch for headlines and comments regarding the USMCA if you are trading the Mexican Peso. With the move lower over the past week, one must wonder how much of a “Done Deal” is already priced into USD/MXN.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.