- Mexican peso outperforming despite pullback against US dollar.
- USD/MXN finds support at the 24.00 area and rebounds.
The USD/MXN bounced to the upside after reaching 24.00 and is back at the 24.30 area. Risk aversion weakened the Mexican peso that erased all gains versus the greenback.
After equity prices in Wall Street resumed the decline, the USD/MXN turned to the upside. The Dow Jones is losing 2.18% and the Nasdaq 2.20%. US yields are falling despite comments from Fed Chair Powell against negative rates.
Despite losing ground versus the greenback, the Mexican peso is outperforming on Wednesday. The best among emerging markets is the Chilean peso (USD/CLP down 0.90%) while the worst the Colombian peso (USD/COP +0.70%).
In Mexico, attention turns to the central bank that on Thursday will announce its decision on monetary policy. A 50bps rate cut is expected. “We see MXN remaining under fundamental pressure, however, the degree to which Banxico surprises with the size of easing or with a dovish tone at the May meeting may negatively impact the peso in the short term”, explained analysts at TD Securities.
Technical outlook
The pair continues to make higher highs and higher lows, a bullish sign. A consolidation above 24.35 should open the doors for a test of 24.50. On the lie side, the 24.00 area is the immediate support and a break lower would target 23.80. The next support emerges at 23.50.
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