Technical Analysis – USDMXN completes pennant formation after aggressive rally
- Christina Parthenidou
USDMXN seems to be completing a pennant formation on the daily chart after skyrocketing by almost 30% to enter the 25.00 zone in March.
The pattern is expected to signal the continuation of the positive trend if the bulls manage to close decisively above the upper trendline. In this case, traders could look for resistance near the 25.00 round level, while the 25.40 barrier, where the rally hit a wall in late March, will be closely watched before all eyes turn to the 25.77 top. Moving higher, the 26.00 and 27.00 numbers could be considered of psychological importance.
On the flip side, with the momentum indicators pointing downwards and showing no signs of an oversold market, a penetration of the lower trendline cannot be excluded. The 50-day simple moving average (SMA) and the 23.25 support area could come to rescue, and if they fail, the decline may not stop until it hits the 22.10 number.
Summarizing, USDMXN is trapped within a pennant pattern that could signal the resumption of the uptrend if the bulls break above the upper trendline. Otherwise, a downside violation of the triangle could hint the start of a bearish cycle.
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