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USD/MXN: Mexican peso gains 4% in a week

  • Mexican peso continues to recover ground versus USD. 
  • NAFTA expectations remain the main driver in MXN. 
  • USD/MXN down 4% from last week highs, tests another key support. 

The Mexican peso is among the top performers of the week. Against the US Dollar is about to post the fifth gain out of the last six trading days as it continues to move away from the multi-month low it reached last week. 

USD/MXN has fallen 4% from last week high at 19.37. It bottomed yesterday at 18.57 (lowest since October 10) but it bounced back above the 18.60 area. At the moment of writing was at 18.61, looking at yesterday’s lows. 

The slide of the US dollar across the board has been the main driver during the last two days, but the change in the short-term bias took place after a sharp rally of the Mexican peso. The currency gained momentum during the fifth round of talks of NAFTA negations that ended yesterday. 

Still, the outcome of the NAFTA renegotiation is unknown. It continues to be a source of uncertainty and risk for the peso. The other main risk event is the 2018 Presidential election. Markets are also waiting for President Nieto to announce who would replace Agustin Carstens as Bank of Mexico Governor. 

USD/MXN Technical levels

The pair is testing the 18.58/60 area that is a strong support. A consolidation below could open the doors for another leg lower with an immediate target at 18.50; below the next support is the 18.30 zone. 

On the upside, now 18.70 is the immediate resistance, followed by 18.90 (Nov 02 low) and 19.05 (weekly high).

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