Based on the price data available on Monthly chart (see below), the USDMXN is in longer term .
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 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 pivoted across alternative .
c. Possible formation which is continuation Pattern
d. Developing potential diversion between weakening in momentum to the downside and with price forming higher lows. This would be significant as 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 formation little more clearer, though there might be other more appropriate description. However series of higher low are very clear.
b. bounce around zero line is also very clear and diversion.
c. Riding 200 MA (weekly)
d. 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 development.
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. is and DAX on daily is also formed a around 12 and higher low from compared with Oct 2018.
4. 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 sentiment on MXN could come under pressure if the MXN Peso began to weaken against USD and commence the next cycle for USDMXN
Conclusion: Longer term 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.
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That is a very good question. Thanks for asking
Looking at historical price of MXY (an ETF of Mexican Index) it can be observed that when Mexican Peso weakens, ie USDMXN goes up, the Mexican ETF declines.
This could be because flight to safety it is likely that money leaves Mexico.
Similarly as with some Emerging Market currencies weakens their Equity Market also declines for similar reasons. These periods their equities suffer more that US equities.