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USDMXN One-Month Implied Vols Fall To Lowest Since February 2020

LATAM FX
  • Mid session weakness for stocks temporarily weighed on Latin American currencies to end the week with USDMXN revisiting the week’s best levels above 17.15 and USDBRL (+0.35%) posturing towards the notable 5.00 pivot that has broadly capped the topside over the past three months.
  • After briefly piercing above resistance, USDCLP has edged a touch lower but remains around 0.25% stronger on the session.
  • Wires continue to pick up on the fact that one-month implied volatility for USDMXN has been sinking below 8%, breaching the 2021 lows in the process and registering at the lowest levels since the early onset of the pandemic.
  • As noted overall, USDMXN remains in consolidation mode for now. After trading sharply higher on Jan 16, the move above the 50-day EMA suggested scope for a continuation higher near-term. A resumption of gains would expose initial resistance at 17.2286, the Feb 13 high.
  • Above here, key resistance comes in at 17.5653, the Dec 5 high.
  • On the downside, key support and the bear trigger, remains at 16.7852, the Jan 8 low, a break of which would instead resume the downtrend. Initial support, which was recently pierced, is the 17.00 handle.
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