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.
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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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