USD/MXN Price Analysis: Mexican peso drops from seven-day top as S&P downgrades Mexico
|- USD/MXN probes three-day losing streak.
- S&P downgrades Mexico from BBB+ to BBB while keeping the negative outlook.
- The US dethrones China with the largest coronavirus numbers.
With the global rating giant S&P probing the Mexican peso buyers, USD/MXN takes a U-turn from a seven-day low of 22.86 to 23.25 amid the early Asian session on Friday.
The S&P cuts down the nation's credit rating from BBB+ to BBB while keeping the outlook negative. Traders reacted to the news in full steam despite inactive market hours in Mexico.
The reason could be traced from the US neighbor’s sufferings due to the coronavirus (COVID-19) as well as the beating through the latest declines in the oil prices.
The nation’s statistics mention 475 cases of the pandemic but President Andrés Manuel López Obrador has been criticized over not being able to take the case seriously while also hiding the actual figures. Further, Governor Miguel Barbosa was also recently triggered public outrage while claiming that the poor are immune to the virus.
On the other hand, oil prices dropped from $25.60 to $24.20 by the end of the settlement period for Thursday. The catalyst to blame could be the demand-supply mismatch due to the virus and the increased production.
It should also be noted that the US dollar isn’t immune to the epidemic as the US Dollar Index also dropped heavily to seven-day low with the surge in COVID-19 cases making it surpass the epicenter China.
Investors will now concentrate on the US House voting on the $2 trillion aid package as well as the virus data/updates for fresh impulse. It should also be noted that the call to stricter rules near the US-Mexico border might also be observed for intermediate moves.
USD/MXN forecast chart
The pair needs to regain its place beyond the 10-day SMA level, currently at 23.87, on the daily chart, failure to do so can keep dragging it to 21-day SMA near 22.00.
Trend: Pullback expected
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