We are at a critical juncture for the USD/Mexican Peso, it all comes down to whether the dollar can put in a decent rally. So far today, the dollar is rallying, the question is will it continue. If it does continue to rally then we may have put in an intermediate cycle low, if it is a cycle low we could see the dollar rally for 4-6 weeks. This would strengthen the dollar versus the peso.

Much like the stock market, it will have to play itself out before we can get a true read on what will happen next. The stock market has put in a very powerful rally with the NASDAQ Composite recovering around 70% of the recent decline.

You can see how precarious the situation is with the USD/Mexican Peso by viewing the chart below. There is not much room to support a continuing decline in the dollar. At critical moments like we are experiencing, you’ll find that I will provide you with follow-ups.

What has been puzzling is that higher Treasury yields are normally associated with a stronger dollar, and yields have been rising. Treasury yields had been driven higher not so much by expectations for stronger growth, but by fears about fiscal instability and inflation moving to higher levels.

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