Search ForexCrunch
  • Recovery of the Mexican peso lost strength during US session as improvement in risk sentiment around EM eased.
  • Banxico minutes: Balance of risks to inflation is tilted upwards.

The USD/MXN pair moved off lows during the US session and trimmed most of the day’s losses. It climbed back above 19.00 but remains far from yesterday’s highs.

Positive sentiment around emerging market pushed USD/MXN to 18.92 (day’s low) but then rebounded and as of writing was trading at 19.06. During the US session, the positive tone on EM eased. Despite rising equity prices in Wall Street (Dow Jones +1.70%), the Mexican stock index, the IPC was falling 0.85% and MXN yields were modestly higher.

Earlier, the Bank of Mexico released the minutes of its latest meeting when it decided unanimously to leave the key rate unchanged at 7.75%. According to the minutes, the majority of board members agree that the balance of risks to inflation is tilted upwards. The depreciation of the peso is the biggest concern for the inflation outlook. They see higher external rates, dollar strength and uncertainty over NAFTA as the main risks for the MXN.

USD/MXN Technical levels

On the short-term, to the upside, resistance levels might be located at 19.15, 19.30 (Aug 15 high) and 19.36 (Aug 13 high). On the flip side, support could be seen at 18.95 followed by 18.85 (Aug 14 & 15 low) and 18.75.

On a wider perspective, the USD/MXN still holds a bullish bias but the upside is likely to remain limited while it holds below 19.15 on a daily close. The key support for the current perspective sits at 18.75 (horizontal level and the 20-day moving average).