The Mexican peso has suddenly shot into the limelight after yesterday's  US presidential debate. With Trump talking repeatedly about losing jobs to Mexico and his previous rhetoric about building a wall to stem the flow of illegal migrants, there is a lot more to expect from USDMXN.

The Mexican peso is currently seeing some volatile movements, since last week's Federal Reserve meeting. After the Fed decided to hold interest rates steady, the peso continued to come under pressure with other factors such as the Algiers meeting also weighing heavily on the currency.

After hitting a high above 19.80 the peso is seen strengthening at today's open with prices currently down by over 1.50% as the peso managed to regain the declines. USDMXN briefly fell to a 7-day low in today's trading at 19.432 before pulling back slightly higher.

Still, many see the price action in USDMXN as a reflection on the outcome of yesterday's debate.

Fundamental factors influence USDMXN

For the Mexican peso, while the Fed and the recent presidential debate might have managed to weaken the currency, the OPEC meeting, due on 28th September, will be another important factor to consider. Traders should therefore be cautious on the outcome of the OPEC meeting in Algiers and whether the oil-producing nations will manage to chalk out a deal to freeze production.

On the economic front, Wednesday will see the release of Mexico's unemployment data, which currently stands at 3.80% in July on a seasonally adjusted basis. On Friday, traders should bear in mind the central bank's interest rate decision, which currently stands at 4.25%. Speculation shows that the central bank could hike interest rates when it meets on Thursday after the currency weakened significantly. According to a Reuters poll, expectations are high that the central bank could be seen hiking rates by 25bps at the meeting this week, pushing interest rates to 4.75% with inflation also supporting the idea. Latest inflation data showed that Mexico's inflation rose in September with the core CPI rising a tad higher than the central bank's 3% target rate, for the first time since 2014.

The central bank’s decision is due on Thursday, 28 September at 1800 GMT.

USDMXN – Price Action suggests further weakening in the US dollar

Looking at a 0.05 fixed Renko chart for USDMXN, the writing is quite obvious after the recent attempt to rally fizzled out. Prices have been steadily declining and the MACD histogram divergence shows a minimum downside target to 19.14.

However, there is scope for a retracement as investors are likely to re-adjust their positions ahead of the Thursday's central bank meeting. In this aspect, the horizontal support at 19.50 is likely to be the short term level from where USDMXN could bounce back. There is a confluence of the median line and the horizontal support. Indeed, if we are to see further declines then what better signal than to wait for a rebound and a failure at the outer median line.

Considering the above, USDMXN could see a near term reversal from 19.50 back to 19.64. As long as the previous high near 19.84 is not breached, and we see a outer median line failure, the bias to the downside is strengthened. Following the break of support at 19.50, USDMXN could be seen extending the losses towards 19.14 which will be a strong support level in my view. Keeping the short bias, below 19.40, further declines can be seen as price could likely test 18.80.

Therefore, watch for any rebound off 19.50 and look for a reversal between 19.64 – 19.74 which would be the ideal reversal level. As long as the highs of 19.84 is not breached, expect the declines back to 19.50 followed by 19.14 and eventually to 18.80.