- USD/MXN continues to hold up well, work off overbought through time
- Next leg could amount to double-digit gains upon breakout
USD/MXN continues to hold up well, work off overbought through time
USD/MXN continues to impressively hold onto its massive gains in Q1, only giving back a portion of those and for only a brief amount of time. The nearly month-long digestion period is a bullish development that should lead to a breakout at some point, potentially soon.
There could be some more back-and-forth first, though, before a breakout occurs. But when a currency pair rockets like it did and then sits up high it suggests aggressive long interest. A breakout through 25.78 should have USD rolling versus MXN, and likely against other emerging market currencies too.
Given the size of the base and general volatility, a 10-15% run could be in the works beyond the breakout point. This could put USD/MXN near 30 at some point in the not-too-distant future. There is one bearish possibility that we still can’t rule out.
Best seen on the 4-hr, a developing head-and-shoulders pattern could mean we are seeing a top develop instead of a bullish continuation pattern. But no need to try and figure out if this will be the case. Price needs to first stop going up (soon) and put in the right shoulder, followed by a decline below the neckline to be official.
Many a head-and-shoulders never come to fruition, which is why it is imperative to let these, and all price patterns for that matter, actually trigger before running with their signaled bias. With that said, continuing to respect the current trend and strength looks like the most prudent move, and if need-be we can pivot to a bearish posture if price action warrants such a move.
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USD/MXN Daily Chart (consolidating)
USD/MXN 4-hr Chart (‘potential’ H&S)
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