The USD/MXN surged higher yesterday with a rapid movement that likely took many speculators by surprise and may have proven expensive.

Yesterday’s trading in the USD/MXN is a stark reminder for speculators that risk management is essential. Traders who were calmly seeking downside momentum on Tuesday on slight reversals higher after Monday’s lows traversing near 20.24000, may have suffered a death blow if they were not using stop losses yesterday and were over leveraged.

At one point yesterday the USD/MXN was tranquilly trading near the 20.51000 vicinity and may have looked like a good place to launch a short position. Short term day traders looking at technical charts may have viewed this juncture as a solid place to ignite a selling position. However, with a few lightning bolts, the USD/MXN was suddenly trading near a high of 20.83200. As of this writing the USD/MXN has come off of its highs and is traversing near 20.71000 with rather fast conditions still being demonstrated.

USD/MXN Express Train Upwards is a reason to be Suspicious and Extremely Careful

The move in the USD/MXN the past few days serves as a friendly reminder that Forex is not for the weak of heart. The vicious move higher can be explained by pundits by saying that growth forecasts in Mexico came in better than expected, but frankly it does not make sense – the Mexican peso should logically get stronger because of this result. Some may point to the lack of clarity regarding U.S Federal Reserve policy however that is suspicious thinking too, because clarity has been in short supply for a while.

• Traders should brace for the potential of further whipsaw results in the USD/MXN and use risk taking tactics with sincere care today.
• Yesterday’s massive buying spree will likely produce additional volatility as financial houses try to find equilibrium with the USD/MXN currency pair, which may cause further pain for day traders.

Support Levels need to be monitored and Speculators may Find Selling Tempting

Speculators who survived yesterday’s price action may be tempted to sell the USD/MXN if support levels start to look vulnerable.  Because of the elevator like ride upwards yesterday, support near the 20.69000 level should be watched carefully. This price which is very close to actual trading as of this writing could prove crucial. If it is broken lower and the 20.68000 to 20.65000 vicinities again are flirted with, it could mean selling pressure will reignite.

Yesterday’s buying surge after lows were tested on Friday and Monday which tested values not seen since early July, is a warning sign for traders that volatility is always possible in the USD/MXN. It could also mean there are speculative opportunities to sell and look for downside action, but risk management is crucial. Stay alert.

USD/MXN Short-Term Outlook

Current Resistance: 20.75800

Current Support: 20.68300

High Target: 20.82890

Low Target: 20.55900

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There is a likelihood that it will soon have a bearish breakout.

Bearish View

• Sell the BTC/USD pair and set a take-profit at 28,000.
• Add a stop-loss at 31,000.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 31,000 and a take-profit at 32,500.
• Add a stop-loss at 28,000.

The BTC/USD price is still going horizontal after it was criticized by one of the most influential people in finance. Bitcoin is trading at 30,000, where it has been stuck in for almost three weeks.

Scott Minerd Bearish on Bitcoin

Scott Minerd is one of the most respected people in the finance industry. He has been the Chief Investment Officer (CIO) of Guggenheim Partners, a company with over $325 billion in assets under management. It is also one of the best-performing firms in the US.

Speaking at a conference in Davos, Mined warned that the coin could drop to about $8,000. He noted that Bitcoin had not established itself as a credible institutional investment because of its volatility. He also noted that the company had bought Bitcoin at $20,000 and exited when it surged to $40,000. In previous statements, Minerd said that he believed that Bitcoin could rise to over $400,000 in the coming years.

In reality, most institutional investors have not invested in Bitcoin. They include giant companies like Blackrock, Vanguard, and T.Rowe Price among others. Some of the big companies that have allocated cash to BTC are companies like MassMutual and Fidelity.

The BTC/USD pair moved sideways as data in the options market showed that the put to call ratio has started falling recently. The ratio has dropped to about 0.63, which is lower than this month’s high of almost 0.70. Ideally, a lower figure is often interpreted as being a bullish catalyst for Bitcoin prices.

Another notable thing is that Bitcoin’s correlation with American stocks has been a bit muted this week. While stocks have dropped sharply following weak earnings and forward guidance, Bitcoin has continued moving sideways.

BTC/USD Forecast

The BTC/USD pair has moved sideways in the past few days. On the four-hour chart, the coin has flattened along the 25-day and 50-day moving averages while the two lines of the MACD are along the neutral line.

Further, the pair has formed what looks like a bearish flag pattern, which is usually a bearish sign. Therefore, with this pennant nearing its confluence level, there is a likelihood that it will soon have a bearish breakout. If this happens, the next key support level to watch will be at 28,000. A move above the resistance level at 31,000 will invalidate the bearish view.