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USDMXN Continues Grind Lower, Approaches September 20 Low

MEXICO
  • Price action for USDMXN (-0.31%) continues to be biased to the downside, with the pair extending to fresh two-month lows on Monday. Recent price action has confirmed a resumption of the current bear cycle and sees spot approaching the next support level of 16.9988, the Sep 20 low. A break of this level would next open 16.6262, the Jul 28 low.
  • BBVA have noted that “while in the near term the low levels of volatility remain favourable for LatAm carry and overall performance, we prefer to adopt a more cautious and sequential approach, protecting levels of USDAndeans and keeping open exposure to the BRL and MXN.”
    • They believe that global and dedicated EM/LatAm accounts could be exposed to the asset class at this time, but also see higher chances of limited demand closer to the end of the year, driving some outflows.
    • Overall, BBVA also prefer to stay exposed to currencies where rate differentials are not dropping substantially. That was the case for the CLP earlier this year (back and forth) and the PEN, but could gradually also include the higher-Betas such as the COP, and eventually the BRL and MXN. The latter could also see heavier trading as we get closer to the elections.
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