USD/MXN up 0.06% on the day; Mexican peso's crossroad dilemma near 20.24

Currently, USD/MXN is trading at 20.35, up +0.06% or 125-pips on the day, having posted a daily high at 20.40 and low at 20.36.

Yesterday's 0.50% rate hike was aligned and matched consensus expected increment; Banxico delivered without further hesitation. The central bank avoided scarcity or any doubts giving the current 'trade uncertainty' that surrounds the US, Canada, and Mexico. 

Nevertheless, a rate hike does not boost immediate capital inflows as traders and investors need to rebalance their portfolios to improve efficiency while risk is adjusted. Hence, the Mexican peso might as well bottom in the weeks ahead as Trump's Agenda seems to pick up some serious steam. 

Historical data available for traders and investors indicates during the last 6-weeks that USD/MXN, a commodity-linked and exotic currency, had the best trading day at +1.83% (Jan.10) or 3983-pips, and the worst at -2.22% (Jan.25) or (4684)-pips. 

Technical levels to watch

In terms of technical levels, upside barriers are aligned at 20.89 (50-DMA), then at 21.38 (high Jan.27) and above that at 21.58 (high Jan.25). While supports are aligned at 20.24 (low Feb.10), later at 19.72 (low Nov.10) and below that at 19.11 (low Nov.3). On the other hand, Stochastic Oscillator (5,3,3) seems to extend the bearish trajectory, but a bottom should be expected around the corner. Therefore, there is evidence to expect further US dollars gains in the near term. 

As the exotic approaches 20.24 level, the crossroad dilemma intensifies as a close and open below this critical support would drag the exchange rate lower towards 19.70. If, in fact, the level holds, then traders would have in place a new bottom to target 20.91.

On the medium-term view, if 22.03 (high Jan.15) is in fact, the top during the first semester in 2017, then traders and investors would have allocated risk around the following support levels: 20.28 (low Jan.29), then at 19.87 (short-term 61.8% Fib) and finally below that at 19.19 (short-term 50.0% Fib) . On the other hand, upside barriers are aligned at 20.92 (high Jan.29), later at 21.09 (high Nov.12) and above that at 21.58 (high Jan.22).

Trump pulling back from the trade war expectation he built himself