Open an Account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open an Account
✖

USD/MXN looking to push to pre-pandemic lows

June 7, 2022 11:36 AM

When the Bank of Mexico (Banxico) last met on May 12th, it hiked interest rates by 50bps from 6.5% to 7% and delivered a hawkish statement. The Committee was still extremely concerned about inflation risks, although it had already raised rates at the 8 previous meetings.  Inflation had risen to its highest levels since January 2001, and revised forecasts higher once again for headline and core inflation for the second and third quarter of 2023. (Mexico reports CPI for May on Thursday). As a result, the Peso has continued to climb, and USD/MXN is trading near its lowest levels since March 2020.

Source: Tradingview, Stone X

On the weekly timeframe, USD/MXN made a high during the week of April 6th, 2020, just after the coronavirus pandemic set in.  Since then, the pair has been making lower highs, while forming a descending triangle, with the base oscillating near the 20.00 level.

On the daily timeframe, the lower bound of the range at the base of the descending triangle the pair has been in is near 19.5491, which has been tested many times since early in 2021. Last week, price finally broke through that level and has formed a flag formation.  The target for the flag formation is near 18.75.

Source: Tradingview, Stone X

Also notice in the bottom panel of the chart above that USD/MXN and WTI Crude Oil have a strong negative correlation, with a correlation coefficient of -0.87.  Readings below -0.80 are considered strong and indicate that the 2 assets move in opposite direction most of the time. Therefore, if Crude Oil continues to move higher, USD/MXN should continue to move lower.

On a 240-minute timeframe, USD/MXN is forming a symmetrical triangle.  The expectation from a symmetrical triangle is that price will break out in the same direction as the prior move, which is lower.  First support is at the bottom trendline of the triangle at 19.4712 and then the lows of May 30th near 19.4136.  Below there, USD/MXN can fall all the way to the lows of February 2020 at 18.5234 (see weekly), just below the target of the flag pattern on the daily timeframe.  However, if support holds, first resistance is at the highs from June 1st at 19.7670.  Above there, price can move to the 38.2% Fibonacci retracement level from the highs of April 28th to the May 30th lows at 19.8813.  The next resistance is the 50 Day Moving Average at 19.9976 (see daily).

Source: Tradingview, Stone X

Both a hawkish Bank of Mexico and the rise in Crude Oil prices have been pushing USD/MXN lower.  The pair has recently broken trough the bottom of the base of a descending triangle and formed a flag pattern, which targets near 18.75.  Will it get there? It may depend on the next direction of Crude Oil.

 

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

FOREX.com is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # 0339826). Forex trading involves significant risk of loss and is not suitable for all investors. Full Disclosures and Risk Warning. Increased leverage increases risk.

GAIN Capital Group LLC (dba FOREX.com) 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA. GAIN Capital Group LLC is a wholly-owned subsidiary of StoneX Group Inc.

© FOREX.COM 2025