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USD/MXN keeps rising and tests 19.40

  • Mexican peso among worst performers on Monday, extends last week slide.  
  • USD/MXN rises above 19.30 for the first time in a month.  

The USD/MXN pair is rising for the fourth-day in-a-row on Monday, on the back of a weaker Mexican peso. Near the end of the American session, it is trading at 19.39, the strongest level since September 5. From the level, it had a week ago, is up 3.10%.  

Mexico’s peso remained weak on Monday after US President Trump reiterated his objections to the migrant caravan. He wrote: “Sadly, it looks like Mexico’s Police and Military are unable to stop the Caravan heading to the Southern Border of the United States. Criminals and unknown Middle Easterners are mixed in. I have alerted Border Patrol and Military that this is a National Emergy. Must change laws!” and added:  “Guatemala, Honduras and El Salvador were not able to do the job of stopping people from leaving their country and coming illegally to the U.S. We will now begin cutting off, or substantially reducing, the massive foreign aid routinely given to them”. The migrant situation poses a risk to the Mexican-US relations.  

Another negative for the Mexican peso was Fitch’s downgrade in its outlook on debt held by Pemex, the state oil company on Friday. The report accelerated the slide of the currency. Mexican bonds were also hit. The 10-year yield rose to 8.37% today, the highest level since the global financial crisis.  
USD/MXN Technical outlook  

The daily and 4-hours chart points to further gains as price hold on top of key levels and also above several moving averages. Also, USD/MXN confirmed the breakout of a consolidation range and now is challenging 19.40. If it manages to break and hold on top of 19.40 more gains seem likely, targeting 19.50 and above 19.67 (Sep highs). On the flip side, a reversal that sends the pair back under 19.20 would be a positive signal for the Mexican peso, but is a scenario not favored at the moment. The question appears to be how high can it go, before making a correction.  

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