USD/MXN Price Analysis: Mexican peso bounces off eight-week top amid mixed catalysts

• USD/MXN steps back from multi-day low of 23.05.
• A pause in WTI oil rally, US dollar pullback and virus challenges to Mexico probe the bears.
• US activity data can offer intermediate clues ahead of Friday’s Mexican Retail Sales and half-month inflation data.
• Risk catalysts like virus updates, trade news offer background music.

USD/MXN extends recovery moves from a two-month low of 23.05 while taking the bids near 23.22 amid the initial Tokyo trading on Thursday. While broad US dollar weakness and risk-on sentiment dragged the quote to the multi-day low the previous day, the latest news concerning oil and risks seem to have offered the latest bounce.

Among them, the pause in the market’s risk-on sentiments, as well as oil’s stop around two months high of $33.78, acquires the front-lines.

With the global virus cases crossing 5 million marks, coupled with increase South American cases, Wednesday’s optimism seems to fade off-late. Also probing the optimists could be intensifying US-China tension, as per the White House statement cited by the Washington Post.

Additionally, news that Mexico City is up for reopening on June 01 despite widespread virus outbreak also weighs on the risk-tone whereas the US extension of the ban on non-essential travels to Mexico and Canada adds to the Mexican currency’s weakness.

Amid all these catalysts, S&P 500 Futures register 0.30% loss to slip below 2,960 whereas US 10-year Treasury yields seesaw around 0.6770% by the press time.

Moving on, preliminary readings of the US May month activity numbers will be the key for the pair traders to watch ahead of Friday’s Mexican data. However, qualitative factors seem to keep the driver’s seat for now.

Technical analysis

The pair’s sustained trading below 50-day EMA level of 23.35 keeps sellers hopeful of breaking 23.00 round-figures to aim for March 27 low of 22.86. On the upside, a one-week-old falling trend line, currently around 23.63, adds to the pair’s resistance beyond 50-day EMA.