USD/MXN drops to lowest in a month and rebounds back above 23.70

• Mexican peso benefits from risk appetite on Monday hits highest since mid-April.
• USD/MXN breaks support at 23.75 but it gets rejected so far from under 23.60.

The USD/MXN tumbled on Monday from near 24.00 to 23.45, the lowest since April 15. It then rebounded, trimming losses, rising back to the 23.70 zone. The pair weakened amid an improvement in market sentiment.

Equity prices in Wall Street are posting important gains. The Dow Jones is rising almost 4% and the Nasdaq 2.50% on the back of optimism regarding a vaccine and the gradual reopening of many economies. Crude oil prices are also rising considerably with the WTI up by 8.50%, above $32.00 a barrel.

The demand for emerging market currencies soared. The Brazilian real is outperforming gaining more than 2% versus the greenback. The dollar is also falling against G-10 currencies and it is up only against the Japanese yen supported by higher US yields.

Technical outlook

The USD/MXN pair accelerated the decline after breaking below the 23.75 support level and bottomed at 23.45. So far it has been rejected from under 23.55. A daily close below 23.60 would clear the way to more losses, targeting April lows at 23.20.

The bias is tilted to the downside in USD/MXN. The key resistance might be seen at 24.20/25, where the 20-day moving average converges with a short-term downtrend line, a rally above would negate the negative outlook.