Mexican Peso: A Breakdown And The End Of A Trade
Dr. Duru | Apr 05, 2018 06:33AM ET
When I last wrote about the Mexican peso three months ago, I described the NAFTA-driven context surrounding the breakdown of USD/MXN below its 50-day moving average (DMA). I was still holding onto a long-standing short on USD/MXN. I managed to keep holding this short until Wednesday evening (April 4, 2018).
The Mexican peso is sustaining a 200DMA breakdown versus the US dollar. USD/MXN also confirmed 50DMA resistance during this move.
I closed my short and took profits after waiting through a period of volatile consolidation during which USD/MXN confirmed 50DMA resistance several times. The resulting pattern looks like a mini “head and shoulders” type of top.
Still, I ended the trade here because I think the risk/reward is starting to favor a USD/MXN (relief?) rally back to resistance. I simply did not want to wait through such a move only to risk a break through resistance. Even the prospect of continuing to collect on the large carry from the wide yield difference between the two currencies was not enough to warrant risking such hard-earned profit.
Additional headlines notwithstanding, I am not likely to trade the peso against the US dollar again until a resolution of a test of resistance and/or a fresh low that breaks through the low of last summer.
Be careful out there!
Full disclosure: no positions
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.