USD/MXN retreats after hitting levels on top of 20.00

• Mexican peso recovers strength after a weak start..
• USD/MXN traded above 20.00 for the first time in 14 months before retreating

The Mexican peso managed to erase daily losses after falling to the lowest level since February 2017 against the US Dollar. USD/MXN rose to 20.03 earlier today but it was rejected from above 20.00 and pulled back.

It continued to correct lower during the American session and recently printed a fresh daily low at 19.86. Higher crude oil prices, an improvement among Latin American currencies (excluding Venezuela) and less pessimism about a not too soon NAFTA deal, supported the recovery of the Mexican peso.

“Mexico reports mid-May CPI Thursday, which is expected to rise 4.4% y/y vs. 4.69% in mid-April. If so, inflation would still be above the 2-4% target range. Next Banxico meeting is June21 and much will depend on how the peso is trading ahead of July elections. April trade and Q1 current account data will be reported Friday”, explained analysts at BBH about upcoming events from Mexico. In the US the key event of the week will be FOMC minutes on Wednesday.

Technical levels

The area around 19.90/20.00 continues to be the key resistance. A daily close con top could open the doors to more gains with potential targets at 20.15 and 20.30.

On the flip side, while below 19.90 USD/MXN could correct further. Support levels area seen at 19.70 and 19.50/55.