- The US dollar is corrected lower in general, the trend remains positive.
- The recovery of the Mexican peso is limited so far.
- USD/MXN poised for more gains if it breaks above the 20.40 level.
The USD/MXN it is about to cut all losses and is close to a critical technical level, which shows that the strength is still in the dollar. The correction from a one-month high reached on Thursday at 20.63 extended to 20.28. Subsequently the pair rose again to the 20.40 area.
Despite the correction and the failure of USD/MXN to hold clearly above 20.40, risks remain to the upside. At 20.45, the 200-day SMA holds, a daily close above should clear the way for more gains. The next strong resistance is seen around 20.70.
On the downside, USD/MXN could drop further to 20.20 without changing the bullish bias. The 20.15/20.20 zone could be seen as an opportunity to buy the pair again. A break down would expose the 20-day SMA at 20.07. A drop below 20.00 would nullify the short-term bullish outlook, leaving the dollar vulnerable.
The weekly chart shows USD/MXN far from highs (positive for MXN) and the 20-week SMA (a relevant technical level) is at 20.44.
USD/MXN daily chart
Technical levels
Source: Fx Street
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