- Mexican assets jumped after authorities offered to buy back bonds used for the new airport construction but then lost strength.
- The US dollar dropped to the lowest in three weeks in Mexico but then bounced sharply, erasing all losses.
- USD/MXN reversal from 20.00 could expose 2018 highs.
The Mexican peso reversed sharply during Monday’s US session, on the first trading day of the new administration in Mexico.
After a strong opening following Andres Manuel Lopez Obrador inaugural address and the plan to buy back bonds link to the new airport under construction, the USD/MXN dropped to 20.00, hitting the lowest level since mid-November. From the lows the pair rebounded 2%, making a dramatic reversal in a few hours.
As of writing, the pair trades at daily highs at 20.39, around the same level it closed on Friday. The bounce to the upside from 20.00, if confirmed, could clear the way for a test of 20.50 and even 2018 highs if the weakness in the Mexican peso persists over the next sessions. Volatility is likely to remain elevated.
USD/MXN Technical outlook
In the short-term, the bearish outlook lost strength during the last hours, and now it appears to be back into the previous trading range near multi-month highs.
Analysts at Commerzbank see the USD/MXN pair moving lower on a long-term view. “The September high and November low as well as the 55 day moving average at 19.6855/19.5769 are now being eyed. Further down meanders the 200 day moving average at 19.2358″. They will retain a bearish forecast while the pair remains below its November high at 20.6353. “Were it to unexpectedly be bettered, it would have the June peak at 20.9612 in its sights.”
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