- USD/MXN fell for a third straight day on Thursday, confirming Peso’s longest daily winning run since mid-February.
- Technical studies suggest scope for further gains in the recently battered Peso.
Mexico’s Peso jumped 4% against the US dollar on Thursday, having gained 2% and 3.69% on Tuesday and Wednesday, respectively. The three-day winning streak is the longest since Feb. 14
The sharp pullback in USD/MXN from the record high of 25.4590 registered on Tuesday to a low of 22.8617 seen early Friday has put the bears back into the driver’s seat.
The 14-day relative strength index has rolled over from the overbought or above-70 territory, signaling scope for a deeper pullback and the 5- and 10-day averages look set to produce a bearish crossover. The MACD histogram, which is used to identify trend strength and trend changes, is about to cross below zero in favor of the bears.
As a result, a drop to 22.00 cannot be ruled out. For outlook to turn bullish, the spot needs to end Friday above Thursday’s high of 22.2484. The resulting bullish engulfing candle will likely allow a re-test of recent highs.
The Mexican Peso fell from 18.55 to 25.4590 in the four weeks to March 24 as the coronavirus pandemic triggered recession fears and the Saudi-Russia oil price war fueled a sharp drop in the black gold, which is Mexico’s key export.