USD/MXN jumps to 18.70 as dollar soars against EM currencies

Dollar heads for biggest daily gain in 3 weeks against Mexican peso.
Sentiment around emerging market currencies boosted USD/MXN.

Matías Salord FXStreet

The USD/MXN is set to end the day with important gains on the back of a rally of the greenback against EM currencies. The pair rose from 18.46 to the 18.70 area, reaching the highest level in a week. From the top, the pair pulled back modestly and it was hovering around 18.63, posting the biggest daily gain in weeks

The Turkish lira is plunging against the US dollar (-5.0%) and weakened Latin American currencies. The Mexican peso was also affected, losing momentum against the US dollar. The peso remains supported by optimism around NAFTA negotiations and the assurance from president-elect Andrés Manual López of pursuing fiscal discipline and business-friendly policies.

Today’s economic data from Mexico confirmed that inflation re-accelerated. The CPI rose from 4.65% to 4.81% (annual) in line with expectations, holding above the central bank’s target. The appreciation of the Mexican peso (+10% from mid-June to August) and constrained core inflation could help keep inflation expectations anchored, easing Banxico’s pressures.

USD/MXN Technical levels

Earlier during the week, USD/MXN bottomed around the 18.40 area, (lowest since April) that become a key support. From the lows, it corrected to the upside and today the move gained momentum, particularly after breaking above 18.60.

The recovery of the dollar found resistance at 18.70 and pulled back. That level offered support last month and is also where the 20-day SMA stands, so a consolidation on top could signal more gains ahead.

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.

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