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USDMXN Edging Back Towards 17.00 As Geopolitical Tensions Abate

EM FX
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  • Diminishing geopolitical tensions have moderately bolstered risk sentiment to start the week with global indices in the green and higher beta currencies firmer in G10. In similar vein, USDMXN and USDZAR spent the morning tracking a little lower on the session, but FX price action overall remains subdued, and a light economic calendar is likely helping implied vols edge lower from last week’s spike.
  • Across EM, there is no particular theme as some modest Euro underperformance is filtering through to weaker CE3 currencies as markets await any comments from ECB’s Villeroy and then Lagarde. Eurozone flash PMIs will take focus on Tuesday and markets will most likely then turn their attention to the April inflation round, commencing next week.
  • Last week’s EURPLN gains resulted in a break of resistance at 4.3268, the Mar 20 high. Note too that the cross is through both the 20- and 50-day EMAs. The breach highlights a short-term reversal and signals scope for a climb towards the 4.40 handle. Initial support lies at 4.3050, the 50-day EMA.
  • Recent price action for USDMXN highlighted the vulnerabilities associated with the growing bullish positioning, indicated by CFTC data. While the price spike will have caught many off guard, some analysts have highlighted this may have cleaned out short-term positioning for a potential return lower. Indeed, HSBC highlighted they would not be giving up on bullish LatAm FX bets.
  • Furthermore, USDMXN’s inability to close back above 17.3860 could be a bearish development. The Jan 17 high is an important reversal trigger. On the downside, initial support moves up to 16.7800, the 20-day EMA.
  • US GDP (Thursday) will be the highlight for the global calendar this week, with Fed speakers notably absent as the FOMC enter their pre-meeting media blackout period.
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  • Diminishing geopolitical tensions have moderately bolstered risk sentiment to start the week with global indices in the green and higher beta currencies firmer in G10. In similar vein, USDMXN and USDZAR spent the morning tracking a little lower on the session, but FX price action overall remains subdued, and a light economic calendar is likely helping implied vols edge lower from last week’s spike.
  • Across EM, there is no particular theme as some modest Euro underperformance is filtering through to weaker CE3 currencies as markets await any comments from ECB’s Villeroy and then Lagarde. Eurozone flash PMIs will take focus on Tuesday and markets will most likely then turn their attention to the April inflation round, commencing next week.
  • Last week’s EURPLN gains resulted in a break of resistance at 4.3268, the Mar 20 high. Note too that the cross is through both the 20- and 50-day EMAs. The breach highlights a short-term reversal and signals scope for a climb towards the 4.40 handle. Initial support lies at 4.3050, the 50-day EMA.
  • Recent price action for USDMXN highlighted the vulnerabilities associated with the growing bullish positioning, indicated by CFTC data. While the price spike will have caught many off guard, some analysts have highlighted this may have cleaned out short-term positioning for a potential return lower. Indeed, HSBC highlighted they would not be giving up on bullish LatAm FX bets.
  • Furthermore, USDMXN’s inability to close back above 17.3860 could be a bearish development. The Jan 17 high is an important reversal trigger. On the downside, initial support moves up to 16.7800, the 20-day EMA.
  • US GDP (Thursday) will be the highlight for the global calendar this week, with Fed speakers notably absent as the FOMC enter their pre-meeting media blackout period.