The market has been very noisy over the last couple of days, so what I would like to see is some type of impulsive candlestick to get involved.

The US dollar fell on Friday to reach the 50-day EMA before turning around to show signs of support. The previous candlestick was a shooting star that tested the 20.50 level and then pulled back. The fact that we have formed two shooting stars followed by a hammer suggests that we are going to consolidate in general. Further adding more interest in this area is the fact that we have the 200-day EMA, so that will attract a lot of longer-term influence.

If we break down below the 50-day EMA, which is essentially the 20.25 level, then it is likely that the US dollar would fall against the Mexican peso. A lot of this is going to come down to the US dollar overall, as we will see a move in the same direction against most currencies. This will be especially true if we are talking about emerging market currencies, such as the Mexican peso, Indonesian rupiah, Indian rupee, and more.

If we do turn around and break out above the top of the shooting star from the Thursday session, it could send this market much higher, perhaps reaching the 20.75 level, maybe even the 2100 level. That being said, if we see the US dollar breakout here, then I would assume you will see the same action against so many of those emerging market currencies. Keep in mind that the Mexican peso does have a little bit of influence from the crude oil market, but ultimately it is not as aggressive against the US dollar as America produces so much.

If there is more of a “risk-on attitude” around the world, then it makes sense that we will see sellers come into the market. If we see more of a “risk-off attitude”, then the US dollar will almost certainly lift off from here. Because of this, I think it is likely that we will continue to see a lot of back and forth as we are waiting to figure out what the market wants to do, but it clearly does not look like we want to take a lot of risk at this juncture. The market has been very noisy over the last couple of days, so what I would like to see is some type of impulsive candlestick to get involved.

Although I think that we may continue to see buyers, it is going to continue to be very noisy and difficult.

The US dollar rallied on Tuesday to test the 200-day EMA against the Mexican peso. After forming a shooting star both last Friday and yesterday, the Tuesday session shows just how stubborn this market has been breaking down, and it looks like we are going to continue to see an attempt to break to the upside. Breaking above the 20.50 level would show an extreme amount of bullish pressure.

Underneath, we have the 50-day EMA which is currently at the 20.2427 level and rising. That could be thought of as an area of support, but currently, we are essentially “stuck” between the 50-day EMA and the 200-day EMA, which typically means that there is a certain amount of pressure being built into the market. At this point, if we were to break out to the upside, it could show extreme US dollar strength, as the breaking to the upside of two shooting stars and the 200-day EMA is a “triple strong” type of signal.

If we were to turn around and break down below the shooting stars from the last couple of days, then we could break down to reach the 20 level. I do not necessarily think that is likely, but if it were to happen, then it is obvious that the Mexican peso would keep up its strength, and we could go looking to reach the 19.75 level below.

When you look at the chart, you can also see that there was a big “W pattern” that we have recently broken out of, which measures for a move to the 20.75 level. That is my target at the moment, but I also recognize that there is a lot of noise between here and there that we would have to chew through in order to go higher, so keep that in mind as well. In other words, although I think that we may continue to see buyers, it is going to continue to be very noisy and difficult, so this is not to say that it is going to be easy to get there. Crude oil does have a bit of an effect on this market, but quite frankly with the Federal Reserve looking as hawkish as it does, and all of the fear around the world, the US dollar should continue to attract a lot of inflows.

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.