USD/MXN drops to fresh weekly lows under 22.00, MXN remains strong
- Mexican peso holds onto weekly gains across the board.
- USD/MXN with a negative bias, under 22.00 even amid risk aversion.
The USD/MXN is falling for the third day in a row on Friday. Recently it bottomed at 21.76, reaching the lowest level since September 23. The Mexican peso remains strong and is among the top performers of the week.
Earlier on Friday, USD/MXN peaked at 22.05 after US President Trump tested positive for COVID-19. It did nod held above 22.00 for long and pulled back even as Wall Street futures dropped.
The Nonfarm Payrolls report in the US showed the economy created 661K jobs in September, below the 895K expected. The unemployment rate fell from 8.4% to 7.9% but mostly due to a decline in the participation rate. The number had no significant impact on the dollar.
Attention in the US focuses on politics ahead of the November 3 Presidential elections. The White House, with Trump’s positive for COVId and the Congress, with negotiations for new stimulus will likely be watched closely by traders next week. US politics had the potential to hit emerging markets and particularly Mexican assets.
“We might only see a slight depreciation during the 4th quarter with the presidential elections in the US, leading to some uncertainty on the future relationship between the US and Mexico. After the outcome of the election, regardless of the winner, there is room for some MXN appreciation,” mentioned analysts at MUFG Bank in their monthly report.
Technical outlook
After being rejected from above 22.50, the USD/MXN started a move to the downside that continues. The pair now is facing a strong support around 21.70/80; a converging area of a horizontal support and the 20 and 200-day moving averages. A close below would expose the next support at 21.50.
On the upside, a daily close in USD/MXN above 22.50 should clear the way to further gains and a test of the September high around 22.70.
Author
Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.
