USD/MXN Breaks the Triangle but has 38.2% Ahead

Trading on Monday is mixed, there is no clear trend on the market. USD against some instruments is stronger and against the rest of them are much weaker. The dollar index does not give a clear direction either. In this environment, we have a nice opportunity on the USDMXN, which starts this week on the front foot with a possibility for a mid-term buy signal.

Since the middle of the July, the pair is in the uptrend but before that, we were witnessing a strong drop (since the end of January), so we can say that the last few months are just a correction here. To be precise, in the past few months, buyers managed to retrace only 38,2% of the downswing, so technically we are still in the negative territory here.

Most recently, the price created a symmetric triangle (black lines). Our optimistic view on this instrument is based on the fact that this week starts with the bullish breakout from the triangle. That, itself is promising but is not enough to trigger a buy signal here. For that, we need to see the price breaking the 38,2% Fibonacci. When we look at the longer term we can see that this level was important many times starting from the March. As long, as we stay below, there is no buy signal here yet – we need to see a daily close above. The positive scenario will be denied once the price will break the purple support, which is slightly below the triangle.

This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis