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Risk Stabilising Halts MXN Sell-Off, Implied Volatility Surges

MEXICO
  • The Mexican peso has stabilised throughout the latter half of Monday’s US trading session following some extremely volatile price action to start the week. Initial MXN pressure saw MXNJPY fall as much as 5.38% at worst levels, the move close to completing an entire reversal of the February – March upswing. Amid the popular carry trade losing its shine, the currency’s one-month implied volatility has climbed to 16.78% from 13.79% on Friday, a two-year high.
  • While the selloff has been curtailed over the past hours, the peso is still registering significant losses on Monday with MXNJPY still down 3.48%. Short term focus on the downside is now on 6.8464 for MXNJPY, the February lows before the next horizontal supports between 6.60-6.65.
  • As for USDMXN, we noted the pair has cleared both the 20- and 50-day EMAs and also traded above the 19.00 handle. The next key short-term resistance is at 19.2906, the Feb 6 high. A break would pave the way for strength towards the 19.50 handle and 19.5882, the Dec 30 high. 18.5054, the Feb 24 high is the first support to watch.
  • The domestic calendar is empty this week before next week’s release of bi-weekly inflation and January activity data. The next Banxico decision is on March 30.
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