Mapping the Market:  'Death cross' bodes more trouble for peso against resurgent yen

By Reuters News

By Robert Fullem

NEW YORK, Oct 13 (Reuters) - The Mexican peso has been sliding against the Japanese yen since September -- hurt by bond-market turmoil that has lifted interest rates around the world -- and the decline may not be over, technical analysis suggests.

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Click here for a detailed technical analysis chart.

Technical analysis uses past price moves on charts to help understand where a market might go next. The peso's exchange rate against the yen is usually quoted as the number of yen one peso buys. So a falling line on the chart means the Mexican currency is weakening.

The first warning came on September 1, when the peso peaked at 9.4441 yen. That was just short of its May 2024 high of 9.4532. Two peaks at about the same level form what chart watchers call a double top. Analysts see this as bearish, meaning it points to lower prices.

Now a more serious signal is forming. Analysts use moving averages, which track the average price over a set number of days, to smooth out daily swings and show the underlying trend. The peso's 50-day moving average, which reflects recent moves, is about to drop below its 200-day moving average, which reflects the longer-term picture.

This crossover is called a death cross, and it suggests the trend is turning down. Several other closely watched moving averages are also turning lower.

The peso also fell below its March 30 low of 8.7892 and failed several times last week to climb back above it. That level is now resistance, a price where sellers tend to step in and stop gains.

There is one bright spot. The peso hit a low of 8.5441 on October 1, according to LSEG data, and bounced off a similar level on October 9. This double bottom, the mirror image of a double top, suggests sellers are reluctant to push the currency lower for now.

If the peso breaks below 8.5441, though, analysts will turn to Fibonacci retracements for possible targets. These are based on the tendency of prices to give back a predictable share of an earlier move, often 38.2% or 50%, before they steady.

The first target is 8.4486, which would be a 38.2% retracement of the peso's rally from April 2025 to its peak this year. The next is 8.1411, a 50% retracement of the same rise. That level is also near the October 2023 low, which makes it an important floor, or support.

On the other hand, if the peso rises above its October 6 high of 8.8275 and then its 200-day moving average, now at 9.0931, further declines would be in doubt. A return to this year's high of 9.4441 would end the slide.

What the chart shows:

  • Peso weakening against yen since September

  • A fall below 8.5441 could target 8.4486, then 8.1411

  • A rise above 8.8275 and the 200-day moving average at 9.0931 would put the downtrend in doubt

(Mapping the Market is a daily column written by Reuters journalists. The commentary is based on a technical analysis of financial charts, which helps assess the likelihood of future price moves but does not guarantee the outcome. The column does not constitute investment advice or trading recommendations. )

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