- Mexican peso consolidates last week gains versus the US dollar.
- USD/MXN tests key support area at 18.80; break lower would open the doors to more losses.
The Mexican peso is marginally higher against the US dollar on Monday. The USD/MXN pair continues to trade near the 18.80 area, consolidating after last week slide.
The greenback dropped from 19.30 to 18.77 (Sep 14 low) and then rebounded modestly. The pair is steady between 18.90 and 18.75. The slide was capped by the 18.80 strong support area. The rally of the Mexican peso took place amid some improvement across emerging markets.
Attention is set on the negotiations between the US and Canada for the new trade agreement. If Canada joins the US and Mexico, the peso could gain some momentum while a negative outcome could put the Mexican currency under pressure.
Other key factors ahead are central bank meeting. The Federal Reserve meets Wednesday 26 and a rate hike is expected. The following week will be the turn of the Bank of Mexico. It is not certain what Banxico will do. While the Mexican peso has strengthened during the last weeks, inflation rose in August for the third-month in-a-row, rising expectations about the possibility of a rate hike.
USD/MXN Levels to watch
The negative tone is likely to prevail while USD/MXN remains under 19.05 (downtrend line). A break and confirmation under 18.80 is needed in order to clear the way to more losses with potential targets at 18.70 and 18.50.
On the upside, a break of 19.05/10 would remove the bearish pressure and could signal more gains ahead. Above the two key resistance levels area 19.35/40 and 19.65/70 (Sep high).
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