USD/MXN Price Analysis: Bullish continuation pattern on D1 amid oil price sell-off

• USD/MXN's daily chart shows a bullish pennant pattern. 
• A breakout looks likely, as Mexico's top export, oil, is taking a beating. 
• Mexico's state oil company has been hit with a rating downgrade.

USD/MXN pair has created a pennant or a bullish continuation pattern on the daily chart. 

A pennant usually occurs following a notable uptrend and comprises of trendlines connecting a narrowing price range. 

A break above the top end, currently at 24.50 would confirm breakout or continuation of the rally from lows near 18.50 observed in February and open the doors to a re-test of March highs near 25.50. Alternatively, a downside break of the pennant would imply bearish reversal. 

However, with oil taking a beating, a bullish breakout looks likely. The West Texas Intermediate's May contract fell as low as -$37 on Monday on oversupply concerns. The June contract also tanked by over 40% on Tuesday. 

Pemex hit with downgrade

Moody's Investors Service downgraded bonds issued by Mexico’s state oil company Petróleos Mexicanos' (Pemex)  to below investment grade, following a similar move by rating agency Fitch. 

The decision to downgrade likely stemmed from Pemex’s high vulnerability to low commodities prices given its fragile liquidity position and excessive debt burden, according to Natural Gas Intelligence. 

The price of Pemex's export crude fell to minus -$2.37 per barrel on Monday - the first instance of negative price on record - marking over 100% decline from Friday's closing price of $14.35.

Daily chart

Trend: Bullish

Technical levels