USD/MXN drops back below 19.50 as US dollar weakens
- Mexican peso rises sharply versus the US dollar, heads for the highest close in over a week.
- USD/MXN shows signs of exhaustion to the upside, remains above critical 19.40.
The USD/MXN pair broke below 19.55 earlier today and bottomed during the American session at 19.43, the lowest level since last Friday. Near the end of the session, it is hovering near the lows, pointing to a test of the 19.40 critical short-term support.
From a technical perspective, the pair is showing signs of exhaustion to the upside after being rejected two times from above 19.60. The overall bias still points to the upside, but the momentum is turning. The 20-day moving average is flattening and stands at 19.40. A close of USD/MXN below the mentioned level could change the short-term bias to the downside; while above 19.60, the bullish momentum would strengthen.
The move lower on Wednesday took place amid a decline of the greenback across the board. An improvement in risk sentiment and another round of weaker than expected US economic data weigh on the dollar.
Going forward, analysts at MUFG bank presented a list of factors that depending on their outcome, might weigh positively or negatively on the Mexican peso: the USMCA trade deal; Mexican fiscal policy; the trade deal between US and China; and interest rate differential. “On the balance of risks, we see conditions for moderate MXN appreciation, but this is a tight call.”
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