Chart Of The Day: Peso Still Pressured Even After Mexican Tariffs Canceled
Investing.com | Jun 10, 2019 10:01AM ET
The Mexican peso jumped by more than 2% on the news the country has escaped President Donald Trump’s tariffs after capitulating to U.S. border policies. A key aspect of the deal is Mexico’s willingness to deploy the Mexican National Guard nationwide with a focus on its southern border.
While President Donald Trump saved face with the headlines, according to the Washington Post, critics say the new deal will have little effect in stopping the flow of migrants.
Meanwhile, the U.S. dollar has been weak across-the-board on mounting expectations of a Fed rate cut, prompted by the various trade wars and compounded by signs the country's record economic expansion is ending. However, technical analysis shows a more complex picture for the USD/MXN pair.
On Thursday, our daily chart showed a double bottom for the FX pair amid Trump’s insistence that tariffs on Mexican imports were coming. Now, we’ll present a different technical perspective— instead of a double bottom, a complex H&S bottom.
The RSI demonstrates the same support: the momentum-based indicator stopped at the congestion since late April and the bottom of a rising channel. If the price holds above the neckline and climbs back above the 200 DMA, we expect it to take on the 20.00 level — the round psychological number that formed a resistance earlier in the month.
Meanwhile, rising peaks and troughs formed a medium-term uptrend, a more conservative read would require an additional peak and trough independent of the previous downtrend, framed by an ascending channel, right beneath where the price has now found support.
h2 Trading Strategies/h2Conservative traders would wait for an additional peak and trough above the key 20 mark.
Moderate traders may play a long position after a close above the 200 DMA, with a stop-loss below the key MA.
Aggressive traders could enter a long position upon evidence of support, with at least a long green candle engulfing a red or small candle of either color, above the channel’s bottom.
Trade Sample
- Entry: 19.2000
- Stop-Loss: 19.1000
- Risk: 1000 pips
- Target: 19.5000, below last week’s congestion
- Reward: 3,000 pips
- Risk-Reward Ratio: 1:3
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