USD/MXN Price Analysis: Consolidates near multi-year low, not out of the woods yet

• USD/MXN oscillates in a range just above the multi-year low touched earlier this week.
• The descending channel formation and the lack of buying interest favour bearish traders.
• A sustained strength beyond the 17.35 region is needed to negate the bearish outlook.

The USD/MXN pair continues with its struggle to register any meaningful recovery from the lowest level since May 2016, albeit manages to hold its neck above the 17.00 mark through the Asian session on Friday.

From a technical perspective, the USD/MXN pair has been drifting lower along a downward-sloping channel extending from the vicinity of the 18.00 mark touched on May 23. This points to a well-established short-term bearish trend and suggests that the path of least resistance for spot prices is to the downside. The lack of buying interest reaffirms the negative bias and indicates that the downward trajectory witnessed over the past four weeks or so is still far from being over.

That said, the Relative Strength Index (RSI) on the daily chart is flashing slightly oversold conditions and holding back traders from placing fresh bearish bets. This, in turn, assists the USD/MXN pair to defend 
support marked by the lower end of the aforementioned trend channel. Hence, it will be prudent to wait for a sustained break and acceptance below the 17.00 mark, or the trend-channel support, before positioning for a further depreciating move.

On the flip side, any meaningful recovery attempt is likely to confront resistance near the overnight swing high, around the 17.25 area. This is closely followed by the trend-channel resistance, around the 17.35 region, which if cleared decisively might trigger a short-covering rally. The USD/MXN pair might then climb to the 17.70 intermediate resistance en route to the 18.00 mark. Some follow-through buying will suggest that spot prices have formed a near-term bottom.

USD/MXN 4-hour chart

Key levels to watch