USD/MXN continues to advance and tests monthly highs at 20.70

• Emerging market currencies under pressure from falling commodity and equity prices.
• Mexican peso far from the worst, but almost at a four-month low against the dollar.
• USD/MXN with sights on 20.70.

USD/MXN is rising for the fourth day in a row and hit as high as 20.70, matching the June high. If it exceeds this zone, it will reach levels not seen since mid-March. The bullish tone remains intact, in a context of a general rise in the dollar, a drop in commodities and weakness in global stock markets.

The emerging currencies record sharp falls these days, before a general advance of the dollar, which occurs even against the currencies of the G10. The Dollar Index (DXY) is at its highest in nearly two decades. This occurs despite the decline in Treasury bond yields, reflecting the cautious climate in the markets. Fears of a global recession continue to weigh on investor sentiment.

In Mexico, it was learned that 60,000 formal jobs were created in June according to the Mexican Social Security Institute, which implies a recovery after the fall of 2,800 in May and is almost 9% lower than that of June 2021. Another report showed a drop in the Consumer Confidence Index to 43.6 in June, down 0.4 from May; It is the second consecutive fall.

Looking at 20.70

If it exceeds 20.70, the USD/MXN would be ready to extend the upward trend. The next target is at the 20.90 resistance, which is the last barrier for a return to 21.00. The bullish tone is expected to remain firm and solid as long as it continues above 20.45.

US data will be released on Wednesday including service sector figures (ISM and S&P Global PMI) and the Fed will publish the minutes of the latest FOMC meeting in the afternoon of the American session.

Technical levels