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.

You need to be very patient with any trade that you take in this market, as it will not necessarily move as quickly as many of the other emerging market currency pairs out there.

The US dollar fell a bit on Tuesday to break down below the 20 pesos level. That being said, there are multiple Federal Reserve members speaking during the day on Tuesday, so a lot of noise would have been anticipated. When you look at the chart, you can see that the 19.75 pesos level has been significant support previously, so it does make sense that we would see it offer support again. In fact, we formed a bit of a “double bottom” and have bounced from there.

On the upside, the 20.25 level should offer a bit of resistance as the 50-day EMA sits there, and it is also an area where we have seen both support and resistance multiple times. However, we have sliced through there a couple of different times, so if we break above there it would not be the be-all and end-all of the trend. If we break above there, the 20.50 pesos level and the 200-day EMA comes into the picture just below there. Ultimately, I do think that we will continue to bang around in this market, but it is also probably going to be highly influenced by the crude oil market, which of course has shown quite a bit of strength as of late.

If we were to break down below the 19.75 level, then it would more likely than not have to do with yields in America dropping, or oil taking off to the upside, take your pick. This is not to say that it would be easy to happen, just that it could. If we break above the 20.50 pesos level, that would be an extraordinarily bullish sign for the greenback, and you would probably see the dollar strengthening against most other currencies. At this point, it appears that the higher interest rates in Mexico continue to attract inflows, right along with the oil market driving up demand for the currency. Keep your position size reasonable, but also recognize that this pair does tend to move very slowly, so you need to be very patient with any trade that you take in this market, as it will not necessarily move as quickly as many of the other emerging market currency pairs out there.

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.

The markets will continue to be paying close attention to a lot of moving pieces, and at this point you cannot count on too much more than volatility.

The US dollar is currently sitting just above the 19.75 pesos level, an area that had recently caused a bit of a bounce. The Mexican peso is highly correlated to oil, which had a very strong move during the trading session, but it is also a situation where the interest rate differential between Mexico and the United States continues to favor the peso as well.

The 19.75 level has been important more than once, and you can see on the chart that I have every 0.25 pesos marked. That is the increment that this market does tend to move in, so I think that if we break down below the 19.75 pesos level, is very likely that we could go looking to reach the 19.50 pesos level. Ultimately, if we were to turn around, I think that we will probably have a bit of a barrier in the form of 20 pesos, and although we have sliced through it a couple of times, there is a certain amount of psychology attached to it.

Looking at this chart, we have recently had the “death cross” form which is when the 50-day EMA crosses below the 200-day EMA, and it is worth noting that this market does tend to trend for long periods of time. With that in mind, we may see a continued strengthening of the peso, especially if interest rates continue to rise the way they have in Mexico. Furthermore, oil adds a bit of a punch to the peso as well, as so many of those rigs in the Gulf of Mexico are Mexican.

If we were to turn around and rally, I think we would have to clear the 20.25 pesos level to have any credible rally that needs to be taken with anything more than a grain of salt. In that scenario, we could go looking towards the 21 pesos level over the longer term, but we would need to see a huge run to the US dollar. We could have that happen, but that is probably more of a “risk-off” scenario than anything else that causes it to happen. The markets will continue to be paying close attention to a lot of moving pieces, and at this point you cannot count on too much more than volatility.

The US dollar has fallen again during the trading session on Thursday against the Mexican peso, as we have reached the 200 Day EMA. This is obviously a very important technical indicator, so it will be interesting to see whether or not this holds as support. Furthermore, this is an area that has been somewhat important in the past, so be an area to pay close attention to.

The Mexican peso is somewhat correlated to the crude oil markets, and as we have seen a recovery in that market, it does make a certain amount of sense that we would see the Mexican peso strengthen. Furthermore, this pair also has a lot of noise in it due to the fact that a lot of remittances from Mexican laborers will have a certain amount of influence, but at this point, I think it is probably more about the macroeconomic crude oil situation than anything else. Keep in mind that a lot of Mexican oil ends up in the United States.

If we break down below the 20.50 pesos level, then it is likely that we will then reach the 20.25 pesos level. That is an area that has been support a couple of times, and with even the site of a double bottom previously, so that should be an area of significant demand. Anything below there would open up the trapdoor for a move down to the 20 pesos level.

On the upside, we need to break above the 20.75 pesos level to start buying, but at that point, I think we would probably make a beeline to the 21 pesos level. Ultimately, this is a market that is going to move not only on the US dollar itself, but the crude oil markets so there are a lot of headwinds in both directions. We got parabolic there for a while, and now we have corrected this move completely. The next day or two should be rather crucial, and risk appetite could again come into play so keep that in mind as well. It is worth noting that this pair tends to be very volatile at times, so keep your position size reasonable, and respect the fact that it is an exotic pair. Because of this, money management is crucial when trading this market, right along with any other exotic currency pair.