The Mexican Peso (MXN) traded slightly lower against major currencies on Friday, weighed down by growing political risks and a negative domestic economic outlook. The MXN continued its decline for the second consecutive day as reforms to Mexico’s judiciary, the removal of autonomous regulatory bodies, and concerns over public finances—particularly those of state-owned Pemex—eroded investor confidence.
Technical Analysis: USD/MXN Recovery Within Long-Term Rising Channel
In terms of technical, USD/MXN is experiencing support from the base of a long-term rising channel, suggesting a potential recovery. After a sharp decline last week, the pair found support near the 50-day Simple Moving Average (SMA) at just above 19.00, preventing further downside.
The pair formed a Bullish Engulfing candlestick pattern on Wednesday and followed up with gains on Thursday, hinting that the short-term trend might be reversing. However, a close above 19.53 (the August 23 swing high) is needed to confirm a shift to a bullish short-term outlook.
Alternatively, if USD/MXN were to break below the lower channel line decisively and 50-day SMA, a continuation of the recent downtrend could be in play. This would require a strong move, such as a long red candle closing near its low or three consecutive days of losses breaking below the channel.
