USD/MXN rises modestly after Banxico keeps rates unchanged

• Banxico left the key interest rate unchanged at 7.75%.
• Mexican peso dropped modestly after the announcement.
• USD/MXN gains on the back of a stronger US dollar across the board.

USD/MXN is trading at the same level it had before the monetary policy decision from the Bank of Mexico. The central bank, as most expected, left interest rates unchanged. Immediately after, the pair rose to 18.69 but only to quickly pull back to 18.60.

Earlier today it peaked at 18.76, the highest level in a week but it lost strength and retreat. The pair is still positive for the day and continues to move to move with a bullish bias in the very short term supported by a stronger US dollar. It needs to break on top of 18.70 to clear the way to more gains.

The Bank of Mexico announced that it kept the overnight rate unchanged at 7.75% as expected, some analysts considered the possibility of a rate hike. The decision was unanimous. In the statement, Banxico mentioned that will maintain a prudent policy stance going forward and repeated that it would continue to monitor the exchange rate, MXN-US differential rates, and economic slack. Regarding the economic outlook, growth risks are tiled to the downside while inflation risks to the upside.

Technical levels

To the upside, the area around 18.70 is the immediate resistance, followed by 18.80 and then 18.95. Today USD/MXN traded on top of 18.70 but failed to hold on top and lost bullish strength. On the flip side, support levels are seen at 18.60, followed by the strong barrier around 18.50 and below at 18.30.