Mapping the Market: Mexican peso may have room to run against the yen

However, a ⁠convincing ​move below the 8.7700-8.8000 area would call into question the bullish formation, raising expectations of more losses. What the chart shows: * The initial uptrend in the peso/yen exchange ⁠rate peaked at 9.4532 in late-May 2024 * A cup-shaped retreat-and-recovery phase followed * It is ⁠now consolidating, forming ⁠the "handle" (Daily markets commentary from Reuters analysts on the signals financial charts are sending - and what they might mean.) (Christopher Romano is a Reuters market ‌analyst.

The Mexican peso has been ​gaining against the Japanese yen for ​more than a year and ‌a pattern forming ​on the chart indicates that might continue. The peso/yen exchange rate is currently forming what technical analysts refer to ‌as a cup-and-handle pattern on the weekly chart. This formation is considered a bullish continuation pattern, meaning that it is preceded by a rise and is expected to resolve in the ‌direction of more gains.

The pattern is characterized by an initial high - in this case ‌the 9.4532 peak in late-May 2024, according to data supplied by LSEG - followed by a U-shaped pullback, then another advance back toward the original peak. This development formed the "cup" shape on the chart. Since then, ⁠the exchange ​rate has been ⁠consolidating - not moving much in either direction - which has been forming the "handle".

If the exchange rate were to ⁠advance decisively above the trendline from the 9.4532 peak, it would confirm the pattern and raise expectations ​of a rise toward the 11.25-11.50 area. A trendline is drawn to connect ⁠prices on a chart to discern direction and levels where the balance of buyers and sellers may shift. However, a ⁠convincing ​move below the 8.7700-8.8000 area would call into question the bullish formation, raising expectations of more losses.

What the chart shows: * The initial uptrend in the peso/yen exchange ⁠rate peaked at 9.4532 in late-May 2024

* A cup-shaped retreat-and-recovery phase followed * It is ⁠now consolidating, forming ⁠the "handle"

(Daily markets commentary from Reuters analysts on the signals financial charts are sending - and what they might mean.) (Christopher Romano is a Reuters market ‌analyst. The ‌views expressed are his own; Editing by Burton ​Frierson and Nick Zieminski)