- Mexican peso drops on risk aversion.
- USD/MXN remains in recent range.
- NAFTA fifth round of negotiations starts on Wednesday.
The USD/MXN rose today for the second day in a row amid some risk aversion. However, the pair remains within the range of the previous days, as it continues to consolidate near 5-month highs.
The pair peaked at 19.19 Monday, the highest since last Wednesday and then pulled back. Near the end of the session is hovering around 19.13, marginally higher compared to Friday’s close.
Last week, as expected, the Bank of Mexico left the key interest rate unchanged at 7%. The decision was unanimous. According to the central bank the rally of USD/MXN that started in September from 17.75, was boosted by the US tax reform plan and concerns about NAFTA negotiations.
It was the last meeting with Agustin Carstens as governor. A new governor will be in place at the next meeting to be held December 14, one day after the FOMC meeting.
NAFTA uncertainties continue to weigh on the Mexican peso. On Wednesday, the fifth round of talks starts. Negotiations are not expected to focus on relevant and conflictive details that were put off for later rounds.
Technical outlook
USD/MXN continues to move in a range, consolidating after rising to the 38.2% Fibonacci retracement of the down move from January to July. The area around 19.30 is a key resistance. A consolidation on top would open the doors to further gains with a potential target at 19.45/50.
The bullish tone eased during the last days but so far, corrective signals are not strong enough. A daily close below 19.00 would point to an extension of the slide from 19.30. The next support levels might be seen at 18.90 and 18.70.
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