- USD/MXN remains trapped within a tight range near its lowest level since December 2015.
- The formation of a descending channel points to a well-established downtrend and favors the bears.
- Sustained strength above the 17.30-40 confluence is needed to negate the negative outlook.
The USD/MXN pair is trading in a tight range around the 16.75 region at the start of the European session on Monday and consolidating its recent losses to the lowest level since December 2015.
From a technical perspective, the decline witnessed over the past four months has been along a downward sloping channel, pointing to a well-established short-term downtrend. Furthermore, the inability of the USD/MXN pair to attract significant buying suggests that the path of least resistance is to the downside. The negative outlook is reinforced by the underlying bearish sentiment surrounding the US Dollar (USD), led by strong expectations that the Federal Reserve (Fed) is nearing the end of its rate hike cycle.
That being said, the Relative Strength Index (RSI) on the daily chart is already showing oversold conditions and warrants some caution before opening further bearish positions around the USD/MXN pair. Therefore, any subsequent dip below the multi-year low around the 16.70 region is more likely to find decent support near the lower end of the aforementioned trend channel, currently pegged near the 16.6240 zone. That being said, some continuation selling will signal a new breakout and pave the way for another short-term move lower.
On the flip side, the 16.85-16.90 area now seems to act as immediate resistance ahead of the round 17.00 level. This is followed by resistance near the 17.10-17.15 zone, which if breached could trigger a short covering move and lift the USD/MXN pair beyond the 17.25 intermediate barrier, towards testing the confluence of 17.30-17.35. The latter region comprises the resistance of the ascending channel and the 50-day SMA, and is also approaching the monthly high. A sustained move above that region could nullify the short-term bearish outlook.
USD/MXN daily chart
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USD/MXN additional technical levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
