- Emerging market currencies are under pressure amid risk aversion.
- The Mexican peso is heading for the lowest daily close since March against the US dollar.
- The next resistance in the USD/MXN is seen at 20.70.
The USD/MXN accelerated the move higher on Tuesday amid a sharp decline in stock markets around the world. Recession fears weighed on emerging market currencies, pushing the dollar higher.
During the American session, USD/MXN reached a high of 20.60, the highest level since June 16. It remains near the top, with the upside pressure still high. Some technical indicators are approaching overbought levels, such as the daily RIS near 70; however, at the moment there are no signs of exhaustion.
The next strong barrier is 20.70, which capped the upside in June. A break to the upside would open the doors for more gains, with a target of 20.90. A drop below 20.45 would ease the bullish bias.
Fear drives up the dollar
The dollar is trading at multi-year highs. The dollar index is at levels not seen since 2002. At the same time, Treasuries are rising. The US 10-year yield plummets to 2.79%, while the 30-year yield approaches 3%.
The Dow Jones falls almost 600 points and the S&P 500 1.54%. In Mexico, the IPC index falls 2%.
Among emerging market currencies, the worst performer is the Russian ruble (USD/RUB +10%), followed by the Polish zloty (USD/PLN +2.80%) and the Chilean peso (USD/CLP +2.35% a 950, new record). Oil falls almost 9%.
USD/MXN daily chart
Technical levels
Source: Fx Street
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