- The Mexican peso takes advantage of risk appetite on Monday, reaching its highest level since mid-April.
- The USD / MXN breaks support at 23.75 but has been rejected so far below 23.60.
The USD / MXN tumbled Monday from nearly 24.00 to 23.45, the lowest since April 15. It then rebounded, offsetting the losses, going back to zone 23.70. The pair has weakened amid improved market sentiment.
Equity prices on Wall Street are showing significant gains. The Dow Jones rose by almost 4% and the Nasdaq by 2.50% against the backdrop of optimism regarding a vaccine and the gradual reopening of many economies. Crude oil prices also increase considerably with the WTI up 8.50%, above $ 32.00 per barrel.
Demand for emerging market currencies has skyrocketed. The Brazilian real outperforms by gaining more than 2% compared to the greenback. The dollar is also falling against the G-10 currencies and is only rising against the Japanese yen supported by higher US yields.
The USD / MXN pair accelerated the decline after dropping below the support level of 23.75 and bottomed out at 23.45. So far it has been rejected under 23.55. A daily close below 23.60 would pave the way for further losses, targeting the April lows at 23.20.
The bias is tilted downward in USD / MXN. Key resistance could be seen at 24.20 / 25, where the 20-day moving average converges with a short-term downtrend line, a rally above would negate the negative outlook.