There is a potential bullish ABCD pattern, which closely resembles a flag pattern, developing in the Mexican Peso. This pattern is bullish because of the retracement, which is less than 38.20%. Anything less than 50% is bullish, while anything less than 38.20% is very bullish. The trigger to this pattern is a break above .05025 before going below .04936. If prices can trigger this pattern on Tuesday, then we would have 4 bars down and 2 bars up. This would be 2:1 right-handed skewing. The skewing shows the momentum, which in this case would be strong. Weak momentum would be skewed to the left (i.e., less bars down to the swing low, and more bars to the breakout high). That is what makes this potential pattern so promising. It combines very bullish retracement with potentially strong upside momentum. The target of this ABCD pattern would be between 0.05169 and 0.05191. This pattern fails below 0.04936.
However, we do have some possible scale out levels before reaching the target zone. The first is between 0.05704 and 0.05100. This zone contains the swing highs from 12-9-20, 1-21-21, and 6-9-21. The next possible scale out would be 0.05123, which is July’s monthly R1 pivot. However, based on the 60-minute chart, I would not be surprised to see some even earlier resistance around 0.05039. This level could cause a small pullback and create a nice buying opportunity.
Stay tuned for more analysis on this potential breakout.