The peso has been strengthening against the dollar for more than a year, but to extend its gains the Mexican currency will need to cross a barrier that has proven to be a bridge too far in recent history.
When trading against the peso for the past 20 years, the dollar has mostly held above an important technical level: the 200-month moving average.
A 200-month moving average is the average price of an asset over the last 200 months, or roughly 16-1/2 years. Technical analysts use it as a long-term indicator to judge whether a market is trading above or below its broader historical trend.
The Mexican peso is currently trading a little bit weaker than its 200-month moving average of 17.0525, according to data supplied by LSEG. It has tested this average repeatedly but failed to break through.
If the peso fails to break this line, traders are likely to expect the dollar to resume its strengthening trend against the Mexican currency. If the peso prevails, then it could build momentum for further gains against the dollar.
What the chart shows:
(Daily markets commentary from Reuters analysts on the signals financial charts are sending - and what they might mean.)
