The USD/MXN currency pair has decisively breached a crucial multi-month support level, according to foreign exchange analysts at Societe Generale, suggesting a bearish outlook. The technical formation of a rounding top pattern further reinforces this downward trajectory, potentially paving the way for declines towards the 19.10 and 18.70 levels. This breakdown reflects a shift in market sentiment regarding the relative strength of the US dollar against the Mexican peso, potentially influenced by factors such as interest rate differentials and economic growth prospects in both countries.
Downside targets include 19.10, 19.00 and possibly 18.70
“USD/MXN’s recent breach of the lower boundary of its established multi-month trading range, coupled with the emergence of a rounding top pattern, strongly indicates the potential for further downside movement,” the Societe Generale analysts noted. “The pair is currently trading near a projected level of 19.30. Should a short-term rebound materialize, the 200-day moving average (DMA), currently positioned near 20.10, is likely to act as a significant resistance level, potentially capping any upward retracement.” This technical analysis suggests that any temporary strengthening of the USD/MXN is likely to be met with selling pressure around the 20.10 mark.
“The currency pair appears increasingly positioned to gradually trend lower, targeting subsequent objectives represented by the lows observed last September and October, specifically in the 19.10/19.00 range, with a further potential decline towards 18.70,” the analysts added. Market participants will be closely monitoring upcoming economic data releases from both the United States and Mexico, including inflation figures, GDP growth, and employment reports, as these factors could influence the trajectory of the USD/MXN pair and either validate or challenge the current bearish outlook. Furthermore, central bank policy decisions from the Federal Reserve and Banco de México will play a crucial role in shaping the future direction of the currency pair.
