USD/MXN decline paused near 100-DMA, bulls targeting break above 20.80

Currently, USD/MXN is trading at 20.64, up +0.54% or 987-pips on the day, having posted a daily high at 20.74 and low at 20.53.

The American dollar vs. Mexican Peso finally caught a break after an epic fail when dollar bulls attempt to break a critical level at 22.03. Furthermore, the experienced weakness has not been created due to a lack of positive US data nor a constructive outlook for its economy. In the end, market participants exacerbated the ongoing 'poor choice of words' from the current US administration.       

Hence, the Mexican Peso continues to be an attractive trade opportunity for 'risk-on traders' as long as Trump's campaign promises do not land soon on American soil. 

Historical data available for traders and investors indicates during the last 6-weeks that USD/MXN, a commodity-linked and exotic currency, had the best trading day at +1.83% (Jan.10) or 3983-pips, and the worst at -2.22% (Jan.25) or (4684)-pips.  

'America First' threatens Mexico's energy sector
Jason Bordoff and Tim Boersma, from the commentary section at CNBC, reported, "Natural gas trade between the U.S. and Mexico over the last five years has soared as a result of the U.S. shale gas boom, which propelled the U.S. into the new role of a natural gas net exporter. This development could not have come at a better time for Mexico, which, despite launching a series of energy reforms, has faced dwindling gas production."

Banxico expected to hike rates this week – Rabobank

Bordoff and Tim Boersma further report, "Mexico has become increasingly reliant on cheap U.S. natural gas imports. Pipeline capacity between the two countries doubled in the past five years, and may almost double again through the end of 2018, according to the U.S. Energy Information Administration."

Technical levels to watch

In terms of technical levels, upside barriers are aligned at 20.90 (50-DMA), then at 21.38 (high Jan.27) and above that at 21.58 (high Jan.25). While supports are aligned at 20.20 (100-DMA), later at 19.72 (low Nov.10) and below that at 19.11 (low Nov.3). On the other hand, Stochastic Oscillator (5,3,3) seems to head north, but still far away from the overbought territory. Therefore, there is evidence to expect further US dollars gains in the near term. 

On the medium-term view, if 22.03 (high Jan.15) is in fact, the top during the first semester in 2017, then traders and investors would have allocated risk around the following support levels: 20.28 (low Jan.29), then at 19.87 (short-term 61.8% Fib) and finally below that at 19.19 (short-term 50.0% Fib) . On the other hand, upside barriers are aligned at 20.92 (high Jan.29), later at 21.09 (high Nov.12) and above that at 21.58 (high Jan.22).

The Buck Bounces Back