USD/MXN Price Analysis: Finds a cushion below 18.00 amid a USD index rally

• USD/MXN has managed to reconquer the critical resistance at 18.00 amid a rally in the US Dollar.
• S&P 500 futures have extended their losses as investors remain cautious awaiting quarterly results from big tech stocks.
• USD/MXN HE is auctioning on a graphic pattern Descending Triangle, indicating a volatility contraction.

USD/MXN has extended its rally to potential resistance at 18.00 in the Asian session. A rally attempt by the Dollar Index (DXY) after a steep decline has infused some strength into the pair. The greenback has bounced after posting a fresh weekly low at 101.20, though it still needs a lot of filters to prove a reversal.

S&P 500 futures have extended their losses in the Asian session as investors remain cautious awaiting quarterly results from big tech stocks. Demand for US government bonds has increased as the Federal Reserve is expected to offer neutral guidance on interest rates after a 25 basis point (bp) hike.

USD/MXN is being auctioned in a Descending Triangle chart pattern on a two-hour scale, indicating a contraction in volatility. The downtrend line of the aforementioned chart pattern is drawn from the April 05 high at 18.40, while horizontal support is placed from the April 03 low at 17.96. The 20 period EMA at 18.00 overlaps the asset, indicating sideways behavior.

In addition, the Relative Strength Index (RSI) (14) oscillates between 40.00 and 60.00, indicating the absence of a possible trigger.

A break of the April 03 low at 17.96 will drag the asset to a new 5-year low below the September 26, 2017 bottom at 17.88, followed by the September 25, 2017 low at 17.72.

On the other hand, a break above the April 19 high at 18.15 will take the asset towards the April 5 high at 18.40 and the March 14 low at 18.55.

USD/MXN two-hour chart