Outlook and forecast: USD/MXN & USD/ZAR

We have seen the emerging market currencies firm on the USD and on many other majors supported by interest rate differentials, general risk-on in global markets, and also firm commodity prices. Below we will look at swing trading long the USD on the MXN and ZAR.

We are looking for a correction in commodity prices which we noted in our recent post in terms of AUD/USD. Click Here to View.

If commodities correct this will weigh on the emerging market currencies as well with both Mexico and South Africa heavily reliant on commodity exports. The USD is also generally oversold with speculators heavily short and in terms of the risk to reward we think it’s attractive in both pairs.

USD/MXN

The USD is trading below the 18.80 level and we are seeing it trade above the outer BB and major support at 18.60 we view it as a buy on a breakout. If we break higher, the stop initially should be behind major support but if there is a strong close in favour of the USD then stop can be trailed behind the outer BB and the target would be this month’s highs.

USD/ZAR

The USD is testing daily chart lows and if they hold we would see the USD as a buy above nearby resistance for a move up to this month’s highs stop initially below recent lows. If we break higher we would be looking for immediate strong follow-through buying to the upside. A Move to the downside to new daily lows negates the trade set-up.

Research provided by LearnCurrencyTradingOnline.com

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