USD/MXN reverses sharply from two-year lows, volatile times for the Mexican peso
|- After hitting the highest level since March 2020, the Mexican peso reversed sharply.
- US dollar recovers ground on Tuesday as the rally in Wall Street ends.
- USD/MXN volatile, without clear signs.
With a 0.82% gain, the USD/MXN is having the best day in three weeks. On Monday, it bottomed at 19.41, the lowest since March 2020; since then it rebounded by 1.50%. The sharp reversal increases the risks of higher volatility and gains ahead.
Has it bottomed?
USD/MXN ended Monday with a small loss and far from the bottom, and above 19.50; all signs of exhaustion to the downside. On Tuesday, the pair continued to rebound and accelerated during the American session, reaching at 19.73, the highest since Friday.
The reversal, if sustained, could mean the end of the recent rally of the Mexican peso unless USD/MXN drops back under 19.50. A likely scenario is for the pair to start a short-term consolidation phase, trading back in the 19.50/19.75 range. A break higher would turn the attention to 19.90.
Volatility has increased during the last sessions, as the USD/MXN broke key support levels. Such price action could persist, also fueled by significant fluctuations in Wall Street.
From a fundamental perspective, analysts at Standard Chartered Global Research, consider that a hawkish Bank of Mexico should support the Mexican peso in the near term. “Given high inflation prints near-term and strong conviction among most board members to accelerate the hiking pace, we now expect Banxico to raise the policy rate by 75bps to 7.75% at its June meeting (we previously expected a 25bps move to 7.25%); this would take the ex-ante real rate close to the upper level of the estimated real neutral rate range (1.8-3.4%).”
Technical levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.