Technical Analysis – USDMXN bears gather ammunition below the 200-SMA

Anthony Charalambous, XM Investment Research Desk

USDMXN slashed in half the gains it earned from July 31 in four days, with the price diving under the eight-month peak of 20.251 and through all the simple moving averages (SMAs) and the Ichimoku cloud.

The technical indicators are suggesting a revival of the down move, with the MACD falling back beneath its trigger in negative territory and the RSI pointing downwards below its 30 oversold mark. More importantly the 42-period SMA seems to be headed for a bearish cross of the 100-period SMA, while the Tenkan-sen has distanced itself from the Kijun-sen, of which both could strengthen the negative outlook.

If the bears take to the frontline and restart the move south by shoving below the 19.510 support level, a test of the 61.8% Fibonacci of 19.390 of the up-leg from 18.858 to 20.251 could unfold. Lower, the 19.340 barrier could draw traders focus, while additional losses below that point would turn the bias from positive-to-neutral as the price approaches the 76.4% Fibo of 19.187.

If the bulls take control and manage to reverse the price above the resistance region of 19.510 to 19.600, the next obstacle could be the 38.2% Fibo of 19.720. Above that, the 50-and 100-period SMAs could provide some friction around 19.870 and before the 23.6% Fibo of 19.922 takes over. Overcoming the latter, the bulls would aim next for the 20.000 psychological number.

In brief, USDMXN is looking bearish in the short-term, while in the medium-term picture the outlook remains positive as long as the price keeps trading above 19.34.