USD/MXN drops to lowest in 7-weeks on US-Canada deal

• USD/MXN tumbles to 18.49 on new NAFTA and then rebounds.
• Mexican peso heads for fourth daily gain in-a-row against US dollar.

The Mexican peso was among the top performers of the day but during the last hours trimmed gains. It opened with a bullish gap against the US dollar after the announcement of a trade deal between US and Canada but then lost momentum.

The USD/MXN bottomed today at 18.49, the lowest level in almost two months but since then it has been moving to the upside and as of writing was trading at 18.65, still below Friday’s close but significantly away from the lows.

The new trade agreement between Mexico, Canada and US removes uncertainty. According to Mexico’s Economy Minister Ildefonso Guajardo it could be coming into effect in the second part of 2019. US President Trump said it was a wonderful deal and he is expected to deliver a statement at any moment. The deal now needs to be signed by the three presidents and the approved by their respective parliaments.

USD/MXN Technical outlook

The short-term trend continues to favor the downside in USD/MXN but it dropped to a very strong technical barrier that is the 18.45/50 zone that capped the downside. A consolidation below would clear the way to more losses with a target at 18.30.

In the very short-term USD/MXN could trade in the 18.70 and 18.50 range. If it rises above 18.80, the greenback would gain momentum but as long as it remains under 19.05 the bias will continue to favor the downside.