USDMXN – Potential Triangle Breakout– Long Term Bullish Trade
Background:
Based on the price data available on Monthly chart (see below), the USDMXN is in longer term Bullish trend.
It formed a major spike high in Jan 2017 and since then it has been in a consolidation, forming higher lows, suggesting strong based being built.
The extreme bullish sentiment for MXN might be fostered by the fact that the uncertainties associated with recent election and Trade Agreement with US is over. However the Trade Agreement with US might have complication currently not anticipated. Regardless the out performance by Mexican Peso might be coming to an end.
Summary of some of the technical:
1. Monthly (see chart below in update)
a. Whilst forming higher lows in this consolidation it is riding 50 MA.
b. Bouncing of the bullish trendlines pivoted across alternative pivots.
c. Possible Cup & Handle formation which is continuation Pattern
d. Developing potential bullish diversion between MACD weakening in momentum to the downside and with price forming higher lows. This would be significant as MACD form possible low above zero line
e. There is possible time symmetry of Approx 11 months between July 2017 low to June 2018 high and June 2018 high to April/May 2019 low being formed now.
2. Weekly (See chart below in Update)
a. Potential Cup & Handle formation little more clearer, though there might be other more appropriate description. However series of higher low are very clear.
b. MACD Bullish bounce around zero line is also very clear and bullish diversion.
c. Riding 200 MA (weekly)
d. ADX is a very slow indicator but it is now below 10. Bouncing from around this level is often an indication of possible new trend in the making. In conjunction with above observation this could be a bullish trend development.
3. Daily
a. Since last major peak I Jan 2017 USDMXN could be forming a potential triangle of 3-3-3-3-3 structure. This likely completed with April 2018 low.
b. A breakout above the 200 MA around 19.50 would confirm with initial resistance around 20 but longer term aiming for new high.
c. MACD is bullish and DAX on daily is also formed a double bottom around 12 and higher low from compared with Oct 2018.
4. COT Data – (Please see chart in the Update)
a. Has relative high open Interest.
b. Net long by Non Commercial (Large Speculators) is at extreme level not seen since April 2013.
c. Such extreme bullish sentiment on MXN could come under pressure if the MXN Peso began to weaken against USD and commence the next bullish cycle for USDMXN
Conclusion: Longer term Bullish breakout of the consolidation is anticipated. Use your own method of entry and trade management. Suggested entry could be upon:
1. A clear breakout above 19.50.
2. A pull back towards 19.0.
3. As this is for a longer term trend trade initial stop could be set around below 18.0 or such level that is appropriate on lower time frame
Warning: This is my interpretation of price action using TA approach that I consider helps me the most but could be completely wrong. Therefore, as always, do your own analysis for your trade requirement and ignore my views.
For those who appreciate my analysis, select to follow me and the chart for notification of future updates. Indicate you like my analysis by thumbs up, comments and sharing it with others. If you have an alternative idea then, please be constructive and share for all to learn from.
Thank you for taking the time to read my analysis.
DanV
Based on the price data available on Monthly chart (see below), the USDMXN is in longer term Bullish trend.
It formed a major spike high in Jan 2017 and since then it has been in a consolidation, forming higher lows, suggesting strong based being built.
The extreme bullish sentiment for MXN might be fostered by the fact that the uncertainties associated with recent election and Trade Agreement with US is over. However the Trade Agreement with US might have complication currently not anticipated. Regardless the out performance by Mexican Peso might be coming to an end.
Summary of some of the technical:
1. Monthly (see chart below in update)
a. Whilst forming higher lows in this consolidation it is riding 50 MA.
b. Bouncing of the bullish trendlines pivoted across alternative pivots.
c. Possible Cup & Handle formation which is continuation Pattern
d. Developing potential bullish diversion between MACD weakening in momentum to the downside and with price forming higher lows. This would be significant as MACD form possible low above zero line
e. There is possible time symmetry of Approx 11 months between July 2017 low to June 2018 high and June 2018 high to April/May 2019 low being formed now.
2. Weekly (See chart below in Update)
a. Potential Cup & Handle formation little more clearer, though there might be other more appropriate description. However series of higher low are very clear.
b. MACD Bullish bounce around zero line is also very clear and bullish diversion.
c. Riding 200 MA (weekly)
d. ADX is a very slow indicator but it is now below 10. Bouncing from around this level is often an indication of possible new trend in the making. In conjunction with above observation this could be a bullish trend development.
3. Daily
a. Since last major peak I Jan 2017 USDMXN could be forming a potential triangle of 3-3-3-3-3 structure. This likely completed with April 2018 low.
b. A breakout above the 200 MA around 19.50 would confirm with initial resistance around 20 but longer term aiming for new high.
c. MACD is bullish and DAX on daily is also formed a double bottom around 12 and higher low from compared with Oct 2018.
4. COT Data – (Please see chart in the Update)
a. Has relative high open Interest.
b. Net long by Non Commercial (Large Speculators) is at extreme level not seen since April 2013.
c. Such extreme bullish sentiment on MXN could come under pressure if the MXN Peso began to weaken against USD and commence the next bullish cycle for USDMXN
Conclusion: Longer term Bullish breakout of the consolidation is anticipated. Use your own method of entry and trade management. Suggested entry could be upon:
1. A clear breakout above 19.50.
2. A pull back towards 19.0.
3. As this is for a longer term trend trade initial stop could be set around below 18.0 or such level that is appropriate on lower time frame
Warning: This is my interpretation of price action using TA approach that I consider helps me the most but could be completely wrong. Therefore, as always, do your own analysis for your trade requirement and ignore my views.
For those who appreciate my analysis, select to follow me and the chart for notification of future updates. Indicate you like my analysis by thumbs up, comments and sharing it with others. If you have an alternative idea then, please be constructive and share for all to learn from.
Thank you for taking the time to read my analysis.
DanV
Comment:
The triangle described in the above idea has taken a little longer than I originally anticipated. First trade reached the proximity of initial profit target.
However, the Net Long by Non Commercials on Mexican Peso Futures (ie short on USDMXN) has hit another even more extreme. Watch out for major trend developing in early 2020.
Really worth taking time and planning your trade
The triangle described in the above idea has taken a little longer than I originally anticipated. First trade reached the proximity of initial profit target.
However, the Net Long by Non Commercials on Mexican Peso Futures (ie short on USDMXN) has hit another even more extreme. Watch out for major trend developing in early 2020.
Really worth taking time and planning your trade
Weekly -
COT -