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MEXICO: USDMXN Showing Reversal Potential on Approach to 20.00

MEXICO
EM BulletMexicoBulletEmerging Market NewsNorth America
  • Following the breach of key support on Thursday around 20.13, USDMXN has continued to grind lower during today’s session, and the clean break highlights the growing potential for a stronger reversal lower. Having slipped below the December lows in recent trade, USDMXN is trading at the lowest level for four months, currently hovering just above the 20.00 mark.
  • Below here, attention turns to the lows seen in the aftermath of the election results at 19.7618, while resistance moves down to 20.3851, the 50-day EMA.
  • Analysts have been sceptical of the peso breaking out of its recent range. They continue to cite the ongoing risks related to tariff uncertainty and a more aggressive easing trajectory from the central bank as providing MXN headwinds. Furthermore, one might assume the significant selloff for US equities in recent weeks would certainly weigh on the emerging market FX basket, of which MXN should be particularly susceptible.
  • However, these dynamics are being shrugged off, and the weaker dollar backdrop along with still attractive carry for the peso, might leave the USDMXN downside vulnerable. Additionally, there appears to be some underlying optimism surrounding the trade talks between US and Mexican officials, emphasised on Thursday by US Commerce Secretary Howard Lutnick praising the country for its calm response to President Trump’s tariff roll-out.
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  • Following the breach of key support on Thursday around 20.13, USDMXN has continued to grind lower during today’s session, and the clean break highlights the growing potential for a stronger reversal lower. Having slipped below the December lows in recent trade, USDMXN is trading at the lowest level for four months, currently hovering just above the 20.00 mark.
  • Below here, attention turns to the lows seen in the aftermath of the election results at 19.7618, while resistance moves down to 20.3851, the 50-day EMA.
  • Analysts have been sceptical of the peso breaking out of its recent range. They continue to cite the ongoing risks related to tariff uncertainty and a more aggressive easing trajectory from the central bank as providing MXN headwinds. Furthermore, one might assume the significant selloff for US equities in recent weeks would certainly weigh on the emerging market FX basket, of which MXN should be particularly susceptible.
  • However, these dynamics are being shrugged off, and the weaker dollar backdrop along with still attractive carry for the peso, might leave the USDMXN downside vulnerable. Additionally, there appears to be some underlying optimism surrounding the trade talks between US and Mexican officials, emphasised on Thursday by US Commerce Secretary Howard Lutnick praising the country for its calm response to President Trump’s tariff roll-out.