- The US dollar spiked early during Friday’s trading session following reports that Israel had launched airstrikes against Iran.
- This drove demand for safe-haven currencies like the US dollar.
- Against the Mexican peso—widely considered a risk-sensitive currency due to its high interest rates—the greenback initially surged. However, by the end of the day, the market had reversed course sharply.
An inverted hammer candlestick formed just below the 19.00 MXN level, signaling potential downside ahead. This suggests that the USD/MXN pair may be poised to fall, possibly targeting the 18.60 level next, with further downside potential toward 17.60. On the flip side, a break above the top of Friday’s inverted hammer could open the path toward the 50-day EMA, currently near 19.45—a zone that has previously seen significant selling pressure.
Rate Favor Mexico
It’s important to remember that the interest rate differential continues to favor the Mexican peso. Additionally, if the U.S. economy performs well, capital may still flow into Mexico, given its close economic ties and status as the largest exporter to the United States. This economic symbiosis often benefits the peso.
From a technical standpoint, a large rounded top has been forming. If measured for a long-term move, this could imply a decline toward the 17.00 level. Notably, the 50-day EMA crossed below the 200-day EMA about two weeks ago—triggering a so-called “death cross”—a bearish signal that may attract more medium-to-long-term sellers into the market.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
