Technical outlook:

USDMXN dropped through intraday lows around 20.1234 on Tuesday, down over 0.50%. The currency is moving in line with our projections made earlier and is expected to sink below 19.4200 going forward. Bears will be inclined to hold prices below 20.7000 to keep the near-term structure intact.

USDMXN has been dropping since 22.1500, unfolding a potential diagonal pattern. A diagonal subdivides into five waves. As we can see, the 4th wave terminated at around 20.6960. If the above-proposed structure holds well, bears will be poised to remain in control and drag prices below 19.4200 in the next few trading session.

On the flip side, if the diagonal pattern is already complete at around 19.4200, prices will be well supported around the 19.8000 levels. Please keep a watch for a bullish turn at around the 19.8000 levels for any potential trend reversal from there. Traders might be preparing to hold short positions for the near-term target towards 19.8000.

Trading plan:

Potential drop through 19.80 and 19.42 against 20.70

Good luck!