Early in New York, USD/MXN drop as low as 15.15051 after the U.S. employment report showed a net increase of 223,000 jobs in April. The jobless rate improved to 5.4%, the lowest level since May 2008. This month’s reading was significantly better than the March reading of 85,000, but the upbeat jobs report was not enough to sway investor’s expectations that rates will be raised next month. If job growth continues to trend above the 200k, level a September rate hike may occur.
Price action on the USD/MXN daily chart shows that since forming both a bearish butterfly and double-top pattern, a bearish reversal has firmly been in place. Since the May 1st high of 15.5923, price has steadily dropped below the 50-day SMA and could be poised for the psychological 15.0 handle. If downward momentum prevails, further support could come from 14.9341 level, which is the 78.6% Fibonacci retracement of the April low to the noted high.
A complete reversal of the bullish run from the middle of 2013 till the record high made this past March is unlikely, as the U.S. economy continues to strengthen. Eventually bullishness may return and attempt a run towards the 16 handle.
The trade: SELL USD/MXN at 15.2020, with a stop loss at 15.3520 and take profit at 14.9520. The risk/reward ratio is around 1:2
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading