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Analysts at CIBC, see some opportunity in selling the USD/MXN pair around 22.75, expecting a decline back to monthly lows at 21.50. They expect the volatility in MXN to rise ahead of US elections and risks from US-China relationship. 

Key Quotes: 

“After rallying for three consecutive weeks, USD/MXN appears to have found a floor at the 21.50 mark. Positive news on the reopening of advanced economies and expectations of a better scenario for the global economy boosted sentiment across risk assets. Moreover, a cautious Banxico benefitted those investors looking to profit from carry trades in emerging markets. These are the reasons why we suggested shorting USD/MXN at 25 back in the last week of April, with a 22 target (12% gain).”

“Despite all the technical moves in risk assets of late, we cannot forget the fundamental picture. We expect MXN volatility to reignite in the coming months given the steep deterioration in growth prospects, renewed risks in the US-China relationship, and increased focus on the US election cycle.”

“From a tactical perspective, the 22.75 mark may offer some opportunities for those looking to quickly benefit from a weaker USD trend, the MXN carry, and global recovery hopes. Hence, we suggest shorting USD/MXN on spikes at 22.75 with a 21.5 target and a tight stop loss at 23.0.”