USD/MXN drops further to 1-week lows
|- USD/MXN extends slide after finding resistance last week at 19.20.
- A weaker US dollar pushed the pair further lower on Monday, moving closer to the 18.70 short-term support.
The Mexican peso is rising against the US dollar for the third consecutive session and recovered all the lost ground last week when USD/MXN peaked at 19.20 amid risk aversion. The pair dropped during today’s American session to 18.77, hitting a 1-week low. Near the end of the session, it was hovering around 18.80, headed to a close under the 20-day moving average.
The move lower on Monday was driven by a weaker US dollar across the board. The negative tone around the greenback increased after the release of the September US retail sales report that came in below expectations.
Despite last week volatility across financial markets, particularly on the back of a sharp slide in Wall Street, the USD/MXN remained within the recent range. The currency showed resilience amid risk aversion. The negative impact was seen in Mexican bonds. The 10-year yield was moving with an uptrend on the back of the positive trend in US yields but last week broke above 8.10% to the highest level since 2011. On Thursday, the Bank of Mexico will release the minutes of the latest meeting when it kept the key rate at 7.75% on a divided decision. In the US, the FOMC minutes are due on Wednesday.
USD/MXN outlook
The pair continues to move sideways around 19.00. The daily close under the 20-day moving average (18.88) could point to further weakens but in order to clear the way to more losses, USD/MXN needs a solid break of the 18.70 support area. Below, the immediate target is seen at 18.60 and then attention would turn to the strong support barrier at 18.45/50.
A recovery on top of 19.05, would be a positive short-term development from a technical perspective for the US dollar that could lead to another test of the 19.20 zone, a key resistance. A daily close above, would signal more gains, targeting 19.35.
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