USD/MXN: Tired of testing 2019 lows, rises toward 19.00

• Mexican peso falls for second-day in-a-row against the US Dollar.  
• Stronger greenback pushes USD/MXN toward 19.00.  

The USD/MXN rose for the second day in a row despite higher crude oil prices and the rally in Wall Street. A stronger US dollar was the key behind today’s rally.  

The pair reached at 18.98,the highest level in six days. Then pulled back modestly and it was about to end the day trading at 18.93. Again the US dollar lost momentum near the19.00 zone like last week, but the pullback has been limited so far, suggesting that the bearish momentum is still positive.  

To the upside, the critical area is 19.00, a psychological level and also where the 20-day moving average stands. A close on top, could signal that a short-term bottom is in place. On the flip side, a decline back below 18.80 will likely trigger another test to the 2019 lows located at 18.73/74.  

MXN Outlook  

The Mexican peso has been receiving support from higher crude oil prices, lower inflation in Mexico and higher interest rates. Also the change to a more dovish Federal Reserve helped the USD/MXN move to 18.73 in March, the lowest since October. The mentioned area was tested several times and held.  

Tensions across financial markets appears to be the critical risk that could trigger a sharp rally in the USD/MXN. Under that scenario, expectations about a Banxico rate cut from a decade high, will ease.  

“We maintain our USDMXN forecast of 19.4 for Q2 2019, as we expect local and external uncertainties to erode the benefits of the high carry embedded in the MXN“, said CIBC analysts.