- Emerging market currencies affected after Fed meeting.
- Outlook for rates in the US gives support to the dollar.
- USD/MXN finds support at 19.50.
USD/MXN is rising on Thursday after trading at the lowest level since early June. The sharp change in trend could herald more upside ahead, especially if the pair breaks above 19.80.
In a day of high volatility on Wednesday, the USD/MXN fell as low as 19.50, in the aftermath of the Fed’s decision. The US central bank suggested it could slow the pace of rate hikes which bottomed out the dollar.
At the press conference, the president of the Fed, Jerome Powell, affirmed that possibly interest rates are going to rise more than previously estimated. This made bonds, stocks and the dollar change direction, boosting USD/MXN.
The USD/MXN rebound was more relevant as it came from a medium-term key support levelwhich is the 19.50 area and was the target after breaking below 19.70.
Dollar gains are widespread and the Mexican peso outperformed most other emerging currencies on Thursday. If the bad moment in Wall Street persists and the rise in US bond yields, expect upward pressure on the USD/MXN.
Should the price break above 19.80, a test of the next resistance at 19.95 would be expected. While if it manages to return below 19.70, the Mexican peso would be strengthened, favoring a consolidation between 19.50 and 19.70.
Technical levels
Source: Fx Street
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