Inside the Currency Market: MXN/USD

Changes occurred in MXN due to a 200 million? intervention by the Bank of Mexico. The earlier post regarding MXN is not valid. Interesting how we saw non uniformity in targets and sell points within the last 24 hours and now we see an intervention by Mexico. An intervention is much more than an exchange rate alignment. The exchange rate is one small part. An intervention is actually a wholesale change of the entire financial system in terms of Bonds and yields, CD’s, Forwards and Forward Rates, interest rates and ancillary financial instruments such as stock markets. Huge volatility should be ahead for MXN as the Mexican system adjusts. The new trade follows.

The bottom 16.2715. Range 16.3532 – 16.2715. Note the bottom is a range point. Range point below 16.2715 next 16.1897. 16.2715 is not expected to break. Range point above 16.4350. Overbought sell point 16.4080, 16.4194, 16.4309. Essentially sell point between 16.4080 – 16.4309. Note the last sell point at 16.4309 is still below the range top at 16.4350. Note the many and wide ranging sell points. That’s warning that trouble exists because prices aren’t uniform. This was seen in AUD/USD, AUD/JPY and EUR/USD over the past 24 hours. It was seen in EUR/USD from 1.0913 – 1.0966 last evening. For MXN, the area from 16.4080 – 16.4309 will be erratic.

Strategy. 16.35333 must break higher to target long to 16.4080, 16.4194 and 16.4309. Then reverse short between 16.4080 — 16.4309. Failure to break 16.3533 targets range bottom at 16.2715. Don’t marry the target. Many apologies for this one, it was far beyond control.

Brian Twomey, Inside the Currency Market, btwomey.com

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