USD/MXN drops sharply below 20.00, heads for lowest close in two months

• The Mexican peso is among top performers across the board.
• USD/MXN breaks 5-day range and accelerates the move to the downside. 

The Mexican peso rose sharply against the US dollar on Thursday despite the slide in equity prices in Wall Street. The risk aversion tone in Wall Street did not affect Mexican assets. Also, other Latin American currencies are up versus the greenback. 

Last week, the USD/MXN broke below critical support levels and also fell under the 20.00 area. Today dropped under the 19.80 and declined further. During the US session, the pair bottomed at 19.61, hitting the lowest intraday level since November 8. 

Price is holding near the lows, about to post the weakest close in two months. From the December high it has fallen almost 5%.  A recovery in Mexican bonds, a rate hike from Banxico, and a positive response from markets to the 2019 budget, drove USD/MXN lower. So far in December, the Mexican peso is the best performer among the most-traded currencies. 

The technical outlook continues to favor the downside. A consolidating over the next sessions seems likely particularly if USD/MXN holds above the 19.60 strong support area. A solid slide below 19.60 would open the doors to more losses.