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Medium-term Trading Idea FX USD/MXN - Wait and See: Follow the Pin Bar Formation

Trading opportunity for currency pair: last week was a lucky one for the Mexican peso. Over the monthly period a Pin Bar reversal is being formed. There’s a week left before the candle closes. If the price of oil keeps rising, wait for the rate of the dollar to drop to 14.59 and then to 13.80.

The Mexican peso is treated like an exotic currency. An exotic currency pair is a pair which includes the US dollar and a currency of a developing economy. You can also include the USD/RUB as one of these pairs.

Exotic pairs have their pitfalls: wide spreads, low liquidity and unpredictability. However, with the right knowledge and a rigorous technical analysis, exotic pairs can bring a healthy profit, just like underlying assets do.

So a currency pair that isn’t very popular amongst traders would right now be a good to start selling dollars against. There’s a week left until the end of the month. There’s a pin bar forming over the monthly time frame. If the USD/MXN rate closes the month at 15.050 or less, the Mexican peso will shift to 13.80.

On Wednesday, the Mexican peso strengthened against the dollar in response to Janet Hellen’s words after the US Fed convened. On Friday the Mexican peso strengthened against the dollar on the back of growth in the price of Brent oil and the fall in the dollar’s value. The same can be said of the Russian ruble over the course of last week.

Oil became more expensive due to the falling rate of the dollar (closure of long positions) and Baker Hughes’ report. The week, which peaked on 20th March, saw the number of drilling rigs in the US drop by 56 (4.97%) to 1,069. Expressed a as a yearly value, the number of rigs has fallen by 734.

The oil industry is the leading sector in the Mexican economy, so low oil prices hurt the county’s budget. The price of Brent oil has grown to $55.58 per barrel. I didn’t mention the ruble for nothing: the USD/MXN and the USD/RUB are having a positive correction. On the weekly time frame, the correction totals 0.8, at 4H - 0.8, 1H - 0.68. They’re almost standing on the spot.

After Janet Hellen’s words and the fall in the dollar on Friday, many key pairs have corrected. Monday will be decisive for the dollar. Monthly and weekly stochastics are in the selling zone; recently they were in the buying zone. A bounce up is possible. If oil continues to rise in price, wait for the dollar rate to drop to 14.59 and afterwards to 13.80.

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