- Emerging market currencies hold onto gains despite a reversal in Wall Street.
- USD/MXN bearish momentum eases during the American session, still heads for the lowest close since late March.
The USD/MXN broke below 23.05 earlier on Thursday and tumbled to 22.74, reaching the lowest level since March 17. Over the last hours, it trimmed losses, and it is trading around 23.00, down for the day but off lows.
The decline was triggered by a rally of emerging market currencies versus the greenback on the back of risk appetite. Recently equity prices in Wall Street turned to the downside against, and the momentum in the mentioned currencies eased, favouring the rebound in USD/MXN back to 23.00. Despite the recovery of the greenback, USD/ZAR is falling 1.65% and USD/BRL 1.55%. The Mexican peso comes next with USD/MXN down 0.89%.
Economic data from the US showed an improvement in May compared April but still showing a hard recession. Initial claims dropped, however, remained above two million while the Markit PMI Composite recovered to in May 36.9 from 26.7 in April (above expectations), but still well under the 50 level. Market participants mostly ignored the numbers.
Technical outlook
The USD/MXN was unable to consolidate below 22.80 and rebounded to the 23.00, as a normal correction. On the upside, the resistance is seen at 23.05 followed by 23.25/30. The bias will continue to point to the downside as long as the pair remains under 24.10.
On the downside, below 22.80 the next support is located around 22.45 followed by 22.10.
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