USD/MXN resumes slide and hits fresh two-months lows at 22.70
- Top currency performers of the week: Brazilian real, South African ran and Mexican peso.
- USD/MXN heads for lowest weekly close since mid-March.
The recovery of the USD/MXN pair was short-lived and it turned again to the downside after reaching 23.15. During the American session, it dropped to a fresh two months low at 22.70. It is about to post the lowest weekly close since mid-March as it hovers around 22.75.
The Mexican peso, as well as other emerging market currencies, gained momentum supported by an improvement in investor’s sentiment that also boosted equity prices. The greenback and the yen were among the worst performers.
From a technical perspective, the weekly close well under 23.20, leaves USD/MXN to more losses or to a consolidation period at lower levels. Main support levels are seen at 22.45/50 and 22.00/21.95. On the upside, now the area around 23.20 is a critical resistance followed by 23.55.
Analysts at CIBC expect MXN volatility to remains elevated “given the deterioration of growth prospects and the peso’s correlation to external news and US equities.” They see value in short USD/MXN positions on spikes toward the 25-25.55 range.
Regarding fundamentals, CIBC analysts see no good news for the Mexican peso as the market has already priced in most of the country’s fiscal uncertainties and political risks. “Mexico’s considerable exposure to the US makes the country a primary beneficiary of a potential stabilization of the COVID-19 outbreak into late Q2 to Q3, while the MXN high carry relative to regional currencies should revive the market’s interest in the currency alongside any signs of improvement in the global economy.”