The Mexican peso (MXN), which is vulnerable to geopolitical risk, trades combined at high pairs on Monday morning as relief resonates through markets due to a transitory easing of tensions in the Middle East.
The clash between Israel and Iran has not escalated as markets feared. The Israeli attack on a military base on the outskirts of Isfahan on Friday has yet to result in a counterattack through Iran, and as a result, the Mexican peso has rallied in pairs. .
From a high of 17. 92 on Friday (when fears of a rally were at an all-time high), USD/MXN fell to 17. 15 on Monday.
The sharp drop in the Mexican peso at the end of last week was due to geopolitical risk, which seems to be the main driver of the currency at the moment.
Although hostilities in the Middle East have temporarily subsided, the threat of long-term epidemics still poses a threat to the currency.
According to the Financial Times’ chief foreign affairs commentator, Gideon Rachman, Russia, Iran, North Korea and China now form an “axis of adversaries” that oppose the West. Rachman points out that the military base on the outskirts of Isfahan was targeted. Through the Israelis there is, in fact, a nuclear enrichment site that uses reactor generation provided through China.
But the Middle East is the only potential source of geopolitical risk. News of a new strain of the Omicron variant of the Covid-19 virus also destabilized markets at the start of the new week.
“Although WHO urges caution, it has noted that symptoms similar to those of the new strain have so far been mild. Because it will take some time to figure out what the most likely effect is on the global economy, we believe threat aversion will continue this week,” analysts at personal investment bank Brown Brothers Harriman said in a note on Monday.
A handful of countries have already adopted minor social distancing measures, but if the tension begins to spread and pose a more serious health threat, it may pose a new threat to investors, leading to a stable budget to protect shelters and outwards. more dangerous assets such as the Mexican peso.
USD/MXN (the price of a U. S. dollar in Mexican pesos) pulled back after breaking a primary trendline for the long-term downtrend.
The breakout to the upside was not enough to counter the long-term downtrend, but it did replace the short- and medium-term scenario, which can now be said to buck its downtrend, favoring long positions over short positions.
That said, the new short-term uptrend in USD/MXN is already showing signs of weakness as the pullback from Friday’s high continues and the lack of additional bullish momentum leads to value appreciation. Support from the undeniable 200-day moving average (SMA) at 17:17 also seems to have been broken. A negative close on Monday would verify a bearish trend of the Japanese candlestick in a shooting star on the chart, with bearish connotations.
A decisive break above the trendline at around 17. 45 would be needed to provide a bullish reconfirmation and trigger a bullish target at around 18. 15.
A decisive breakout would be characterized by a longer-than-average green candle breaking above the trendline and closing near its high, or 3 consecutive green candles breaking above the level.
The Relative Strength Index (RSI) has now broken out of the overbought territory and entered neutral territory, suggesting upside opportunities.
However, if a pullback persists, the 100-day SMA at 16. 96, followed by the 50-day SMA at 16. 82, will most likely solve the price problem.
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EUR/USD lost its appeal and turned negative on the day near 1. 0700 in the US session on Tuesday. The knowledge showed that the Hard Workload Index rose more than expected in the first quarter and boosted the dollar.
GBP/USD moved lower and fell towards 1. 2500 in the second part of the day. The US dollar strengthens on wage inflation data, forcing the pair to remain on the sidelines.
Gold remains bearish tension and has dipped towards $2,300 on Tuesday. The benchmark 10-year U. S. Treasury yield remains in positive territory above 4. 6% after data from the U. S. Labor Cost Index. weighed on XAU/USD.
Ripple (XRP) trades broadly sideways on Tuesday after finishing above $0. 51 on Monday as the banknote company’s legal war against the U. S. Securities and Exchange Commission persists. U. S. Securities and Exchange Commission (SEC).
Headline inflation in the euro area remains solid at 2. 4%. With rising energy costs and domestic demand, questions about the direction of inflation become more pressing.
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