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USDMXN Extends Higher Following Surprise Banxico Action

MEXICO
  • As a reminder, on Thursday Banxico announced it will reduce a hedge program that had been designed to tame volatility, citing that operating conditions in the exchange market “have returned to adequate levels” of liquidity and depth. The new policy will reduce the hedging program and also reduce its maturity. Full details are here.
  • USDMXN immediately spiked on the surprise announcement rising roughly 2% to a high of 17.1065 before paring a small portion of the move before the close. However, as markets continue to digest the news, the pair has edged higher overnight, briefly printing at 17.20.
  • Key short-term resistance has been defined at 17.4280, the Aug 4 high. A clear break of this hurdle is required to highlight a potential short-term reversal and open 17.7714, the May 31 high.

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