Ultimately, you can look at this more or less as a large range-bound trade that is trying to break to the upside.

The US dollar initially tried to rally on Wednesday but seems to be struggling just a bit against the Mexican peso, as the 20.18 level has been a little bit of short-term resistance. The 200-day EMA is at the 20.26 level and is more likely than not being watched at the moment. However, the candlestick on Tuesday was rather impulsive, and it’s worth noting that over the last several weeks, all of the big candlesticks have been green, suggesting that there is much more aggressive action on the side of buyers.

It looks as if we will pulled back just a bit, but the 20 pesos level probably brings in a bit of money as it is a large, round, psychologically significant figure. Granted, the Mexican peso is somewhat sensitive to the crude oil markets, but it’s also worth noting that most commodities have gotten hammered. While crude oil has been a bit of an outlier, the reality is that the commodity markets give us a bit of a heads-up as to how the global economy may be likely to act.

The market initially shot higher but then pulled back as it suggests that we are going to continue to see a lot of noisy behavior. However, if we can break above the 200-day EMA, then it’s likely that we could go to the 20.50 level, where we had seen a lot of selling pressure previously. If we can break above the 20.60 pesos level, then it is likely that we will go higher, perhaps reaching the 21.50 level.

If we were to turn around and breakdown below the 19.82 level, then it’s likely that the 19.50 will be a potential target as we have bounced from there previously, and of course, it’s an area that will offer quite a bit of noise. Breaking down below that could send the US dollar tumbling, but ultimately, I don’t see that happening in this type of environment. This pair does tend to be rather noisy, as so much in the way of remittance transactions and day-to-day business happened across this border. Ultimately, you can look at this more or less as a large range-bound trade that is trying to break to the upside. Expect volatility, but anybody who has traded the Mexican peso before understands this.

It still looks like the greenback is king.

The US dollar rallied nicely against the Mexican peso on Monday, continuing a bounce that we have seen since mid-last week. The greenback has been one of the few currencies strengthening consistently out there, and it certainly looks as if we are going to continue to see that against most emerging market currencies. The Mexican peso appears to be no exception, as we have now crossed above the 20.25 pesos level.

The size of the candlestick is decent, and now that we have broken above the 50-day EMA, we have now threatened the 200-day EMA. We cannot break above there yet, but it looks as if it is only a matter of time before we attempt. If we break above there, then the 20.50 MXN level would be next. That is an area where we have seen resistance previously, so I think it is a big threat to the upside. If we can break above there, then it is possible that the US dollar could go much higher, perhaps reaching the 21 level.

On the downside, if we were to break back below the 20 pesos level, then we might see another attempt at the 19.75 level. That is where we had recently formed a double bottom, but it seems to be very unlikely of a target at this point. If we break down below there, then we could see a move to much lower areas.

Keep in mind that the US dollar is considered to be a safety asset, as the emerging market currencies are shined in that type of situation. The market has been very choppy, but that is rather normal for this pair, as you can see based on historical price action. The Mexican peso is influenced a bit by crude oil, but quite frankly that correlation is starting to break down as people are worried more about risk appetite trading than anything else. The US dollar has been like a wrecking ball against most things, and the Mexican peso is not going to be any different anytime soon. The US dollar will continue to be instrumental as to where we go in other markets, not just the currency markets. That being said, it still looks like the greenback is king.

Keep in mind that the Mexican peso tends to move in the 0.25 MXN increments, so pay attention to that.

The US dollar has found buyers during the trading session on Tuesday against most currencies, and of course, the Mexican peso was going to be no different. The 19.75 MXN level has been supported multiple times now, and it looks as if we are trying to form a major support level. The area in this general vicinity seems to be attracting a lot of buyers, so the fact that we bounced is not a big surprise.

What the surprise is would be the size of the candlestick. Breaking above the 20 MXN level is something worth paying attention to, and at this point, we have to start to ask the question as to whether or not we are forming some type of larger W pattern? If we do, a break above the 20.25 MXN level would kick off a longer-term buying opportunity, but I also recognize that there is a lot of noise above there that could come into the picture and cause a few headaches. In other words, it will be more of a grind higher than anything else.

Keep in mind that the pair does have a crude oil dynamic attached to it, as the Mexican peso is quite often used as a proxy for crude oil, but at the same time the United States is one of the world’s biggest producers. In other words, that dynamic may not be as strong as it once was, but if we do see a huge run higher in the crude oil market, we could turn around and break below the 19.75 level, which of course could send this market much lower.

The market had previously fallen apart to get down to this area, so one has to keep in mind that you need to see a bigger move than the one that we had on Tuesday, so the next candlestick or two could be rather crucial. The other possibility is that we simply go back and forth in a grinding consolidation area, but only time will tell. The 50 Day EMA is also sitting at the 20.25 level, so that is yet another reason that we should be paying attention to that level if we do approach it. Keep in mind that the Mexican peso tends to move in the 0.25 MXN increments, so pay attention to that.