- Risk aversion intensifies in financial markets.
- Treasuries also lower, US yields at multi-year highs.
- USD/MXN breaks key resistance levels, tests 20.45/50 zone.
The USD/MXN rises sharply on Monday as global markets fall. The pair went from below 20.00 to 20.50, reaching the highest level since May 2nd. It is posting the biggest daily gain in months fueled by risk aversion.
Latin American currencies are the worst performers this Monday. The USD/CLP (Chilean peso) gains 2.50%, followed by the USD/BRL (Brazilian real) which rises 2.25% and the USD/COP (Colombian peso) which rises 2.20%. USD/MXN is up 2.30% and is about to post the highest close in a month.
The rally is testing the 20.45/50 resistance zone. This is an area that limited increases in April and May. A break to the upside should trigger further gains with the initial target of reaching the 20.70 area. As long as it is below 20.45, USD/MXN losses seem limited, with new support levels at 20.15 and 20.00.
If the current mood in the financial markets persists, the Mexican peso is likely to remain under pressure. A recovery could cap gains.
The economic calendar is clear in Mexico for the current week. The key event will be the Federal Reserve meeting. On Wednesday the FOMC will announce its decision. A rate hike of 50 basis points is expected, although some analysts consider the possibility of a higher rate hike after the latest CPI figures.
Technical levels
Source: Fx Street
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