The decline of USD/MXN, which started in 2021, has continued into 2022, causing concern for some economists. Société Générale economists have taken a closer look at the situation and believe that the move is overextended.
The currency pair recently breached the lower limit of the range and is close to a potential support zone of 17.90/17.60. This level represents the low of 2018 and projections, and as such, it could provide some support for USD/MXN.
However, the daily MACD is within deep negative territory, denoting an overstretched move. A test of this zone could lead to a rebound, but the 50-day moving average at 18.85/19.00 is expected to offer short-term resistance.
The USD/MXN currency pair, which compares the U.S. dollar to the Mexican peso, has been on a downtrend since the beginning of 2021. In January of that year, the pair was trading at around 20.00. By the end of the year, it had fallen to around 19.00. It has continued to decline into 2022, breaking the low of 2022.
Société Générale economists note that the move is a bit stretched, indicating that it may be due for a rebound in the near term. They point out that the currency pair is close to a potential support zone of 17.90/17.60, which represents the low of 2018 and projections.
Despite this, the daily MACD is within deep negative territory, indicating that the move may be overextended. As a result, a test of this support zone could lead to a rebound, but the 50-day moving average at 18.85/19.00 is expected to provide short-term resistance.
The Mexican peso has been under pressure due to a variety of factors, including political uncertainty, corruption scandals, and a slowing economy. In addition, the peso’s value has been negatively affected by falling oil prices and the strengthening of the U.S. dollar.
On the other hand, the U.S. dollar has been strengthening due to a rapidly recovering U.S. economy, higher inflation, and the U.S. Federal Reserve’s decision to begin tapering its bond-buying program.
This divergence in the economic performance of the U.S. and Mexico has contributed to the decline of USD/MXN. However, the pair’s extended downtrend has caught the attention of some economists who believe that it may be due for a rebound.
In conclusion, while the USD/MXN currency pair has been on a downtrend since the beginning of 2021, it may be due for a rebound. The currency pair is approaching a potential support zone of 17.90/17.60, but the daily MACD indicates that the move may be overstretched. As such, a test of this zone could lead to a rebound, but the 50-day moving average is expected to provide short-term resistance. Investors should keep a close eye on this currency pair in the coming weeks to determine whether a rebound is likely.
