- Mexican peso recovers after having worst day in months.
- Pair gain 2% from last week low, reverses sharply.
The USD/MXN pair is falling on Monday after having the biggest gain in months on Friday. A correction of the greenback across the board pushed the pair to the downside. Still, volatility remains elevated.
On Wednesday it bottomed at 18.73, the lowest level since mid-October and on Friday jumped from 18.85 to 19.17. Today it is pulling back and recently fell to 18.98 and quickly bounced back above 19.00. As of writing was trading at 19.01.
Levels to watch
The Mexican peso trimmed Friday’s gains. The rally of USD/MXN was capped around 19.16/21 (broken uptredline and 20-day moving average), a key short-term level. A close clearly on top would point to further gains for the US dollar. The next resistance levels area seen at 19.30 and 19.45.
While below 19.22, the upside could be seen as limited. The immediate support might be located at 18.95; below the bearish pressure will likely intensify, exposing 18.85.
Banxico meeting eyed
On Thursday, the Bank of Mexico will have its policy meeting. No change in rates is expected. “As global monetary policy has become more benign and the peso has stabilized, the central bank of Mexico is likely to remain on hold in the short-term. In fact, Mexico’s economy slowed noticeably in 2018, while this sluggish momentum has carried into 2019 as well. As a result, the central bank may look to reverse course and cut policy rates in an effort to reignite growth and inflation. Markets share a similar outlook as well and are currently pricing in two full rate cuts from the central bank over the next year. While we expect the central bank to keep rates steady next week, we anticipate the tone to be more dovish in nature, suggesting cuts may be on the horizon”, wrote Wells Fargo analyst.
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