USDMXN made a rebound this week as the USD restarted its momentum to the upside.
The US dollar has found a mild bullish impetus in Jerome Powell’s ECB forum appearance where he reiterated his hawkish outlook for the US economy. Powell believes that the US economy remains well positioned to absorb tighter credit conditions while avoiding recession and rising unemployment.
Looking at the 4-hour chart, we can see that the USDMXN price is firmly in a consolidation zone between the 61.8% and 50.0% Fibonacci levels. While spending most of the past few days testing the 61.8% level, leading to an eventual strong rejection, the pair is now looking like it wants to test the 50.0% level, possibly forcing a downtrend.
Look for a rejection of the 50.0% level, and the creation of a lower high on the downtrend. A breakthrough on its first real test of the 50.0% level would see an emboldened bearish trend encountering the strong 38.2% level. Overcoming the 38.2% level will be no small task for the pair but doing so would see the USDMXN confronting the strong demand zone at around 19.40 and 19.70. This is where you might expect a stubborn level of support, compelling a bounce back to the upside and the creation of the lower low.
On the other hand, a break on the 61.8% Fibonacci level to the upside might continue the bullish rebound as viewed on the 4-hour timeframe. In this scenario, the pair might continue to the strong supply zone between 20.4 and 20.7.
