USDMXN is looking to break away from the descending price action that has blighted a potential move to the upside. The significant false breaks over the past 6-months have led prices to pre-pandemic lows.
However, since the mid-$19 bottom at the beginning of the year, the bias has now shifted to the upside. This has led a slight rally towards the psychological $21 region, and more importantly breaking away from the Ichimoku cloud engulfment.
The ongoing divergences noted on the momentum indicator could lead to a reversal. However, bulls will be looking to press on and drive upwards, eclipsing the previous false breaks.
A short-term perspective looks at prices trading in an ascending channel since last week. This momentum looks to continue as tests at the lower channel have seen some support, leading to a move at the mean.
The recent hidden bullish divergence triggered a move to the top channel, however that push was not supported as prices then declined.
The next test will be if prices can maintain their lofty heights, and out of reach of the Ichimoku cloud. Should the trend fade and pierce the lower channel, then the currency pair could be in line to move back to the lower end of $20.