MXN Pairs Higher Today as EM Currencies are Sold

As news began to circulate through the markets earlier today that Japan’s Government Pension Investment Fund (GPIF) could possibly be reallocating funds out of Yen and into Euros and US Dollars, Emerging Market (EM) currencies began to sell off as well, in anticipation that they may be the next ones sold by the GPIF to raise capital.

USD/MXN is up nearly 1.5% today, as price is trying to break above the top of a descending channel (which is inside a larger descending channel). Price is currently trading at 18.8282. USD/MXN is closing at channel resistance.

Source: Tradingview, City Index

The next resistance level is the larger channel trendline near 19.1150. Horizontal resistance is just above that near 19.2000. Horizontal support comes in near the high on Tuesday at 18.6610. Below that is horizontal support near 18.5233, and then the bottom trendline of the smaller descending channel near 18.3650. Notice on the 240-minute timeframe that the RSI is overbought, so a short-term pullback is not out of the question. Bulls will look to buy dips near these levels as they anticipate a continued move higher.

Source: Tradingview, City Index

EUR/MXN is having similar price action today and the pair breaks out of a falling wedge on a 240-minute timeframe. The target for the breakout of a falling wedge is a 100% retracement of the wedge, which would target near 21.0000. There is resistance above at the 38.2% and the 50% Fibonacci retracements of the wedge at 20.4032 and 20.5160 respectively. Horizontal support (recent lows) and wedge trendline support near 20.0379. The RSI is not quite in overbought territory; however, bulls will again be looking for dips to buy near the breakout of the wedge.

Source: Tradingview, City Index

Emerging Market currencies, in general, need to be watched for the possibility of larger selloffs. Other EM currencies were bid today as well, for example USD/ZAR (up 1%). Could the US Dollar now be the safe haven currency because of the global slowdown and the spread of the coronavirus in Asia? Watch as the Global PMI’s are released throughout Friday for hints. This will be our first indicator of economic data for February and, therefore, our first look to see if manufacturing data was hit after coronavirus developments.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.