TA of the Day: Can USD/MXN Bulls Hold the Line?

US Dollar/Mexican Peso It’s been on the decline since the end of June. Ah Karamba!

Recent price action is in favor of the bears, but oversold signals point to a potential pause or even a recovery, so the bulls are whispering, “Wait a minute, my friends!”

you welcome in Teaching Assistant of the Day (TAOTD)! 👋

Here is the daily chart:

📈 Technical analysis of the USD/MXN pair on the daily chart

Using the technical analysis concepts we covered in our Forex course, let’s analyze the USD/MXN pair.

Moving Averages (SMA):

• 200 day simple moving average:Centered around the 17.2748 level. The price is currently above this level, indicating a long-term bullish momentum. The slope is to the topindicating a long-term trend.
• 50 day simple moving averageThe price is at the level of 17.6500. The price is slightly above this level, indicating a medium-term uptrend. The slope is to the topand 50 MA is above 200 SMA, which is bullish signals.

If you are new to moving averages, read Pipsology School’s lessons on how to use moving averages.

Bollinger Bands (20, 2):

• Bollinger BandsThe price is currently near the lower band of the Bollinger Band (17.5278), indicating that the market may be OversoldThis can often be a prelude to a price bounce towards the middle or upper band.

If you are new to Bollinger Bands, read our Pipsology School lessons on how to use Bollinger Bands.

Random:

• RandomThe current reading is around 10.65/10.45, indicating that the market is in Oversold This indicates the possibility of a reversal or at least a temporary recovery.

If you are new to Stochastic, read our Pipsology School lessons on how to use Stochastic.

🕵️ Key Notes

Price movement:

• UptrendThe price was in an upward trend, recording higher highs and lows until the end of June, but has recently seen a pullback.
• Bearish price action: This was observed in early July when the price started making higher highs and lower lows after failing to hold above the 18.5000 level. A breakdown below the June 24 low is not a good sign for bulls.
• SupportsThe price found support near the 50-day simple moving average (17.6500), which coincides with a previous consolidation area.
• resistanceThe price is facing resistance near the recent high at around 18.5000.

Immediate support and resistance levels:

• SupportsImmediate support is found at the 50-day SMA (17.6500) and the 200-day SMA (17.2748).
• resistanceImmediate resistance is found at the recent high at 18.00000 and further resistance at 18.5000.

If you are new to support and resistance, read our Pipsology School lessons on how to use support and resistance levels.

Bollinger Bands:

• The presence of the price near the lower band of the Bollinger Band indicates that the market is in the oversold zone and a bounce to the middle band (18.0334) or the upper band (18.5390) is possible.

Random oscillator:

• Stochastic in the oversold zone indicates that selling pressure may be easing, and a recovery may be on the horizon.

🤔 Possible trade scenarios

He is USD/MXN Buy or Sell?

The following trading scenarios are provided for educational purposes only. Since they do not include full risk management practices, they are not intended to serve as actual trading recommendations, but rather as food for thought to help you generate your own trading idea.

Long bias:

• Point of ConsiderationConsider entering a buy position if the price finds support near the 50-day simple moving average (17.65001) and shows signs of a bounce, such as a bullish candlestick pattern or a random crossover from oversold levels.
• Point of cancellationConsider setting a stop loss below the 50-day SMA around 17.65001 to manage risk.
• potential targetWe expect a move towards the middle Bollinger band (18.03345) and the recent high at 18.00000. If the uptrend continues, target the upper Bollinger band (18.53908).

Short bias:

• Point of ConsiderationConsider entering a sell position if the price fails to break the resistance level at 18.0000 and shows signs of bearish momentum, such as a strong bearish candlestick pattern or the stochastic indicator fails to break out of the oversold zone.
• Point of cancellation:Place a stop loss above the recent high at 18.50000 to manage risk. This level is very important as a break above it would invalidate the bearish setup.
• potential targetThe initial target could be the 200-day SMA (17.2748). If the downward momentum continues, expect further decline towards 17.00000 or lower.

📝 TAOTD Summary

• directionThe trend was up, but the recent pullback and oversold stochastics indicate a possible reversal or consolidation.
• Main levelsSupport at 17.6500 and 17.2748, resistance at 18.0000 and 18.5000.
• PaidOversold conditions indicated by the stochastic oscillator and price near the lower Bollinger band indicate a possible bounce, but if price fails to hold support, further decline is possible.
• Moving average analysisWith the 50-day SMA above the 200-day SMA, and bullish slopes on the 50-day and 200-day SMAs, the uptrend remains intact for now.