USD/MXN at lowest since May 2016, down 3% for the week
The Mexican peso and the Brazilian real outperform in the currency market during the week. On Friday, both extended weekly gains versus the US dollar after weaker-than-expected US economic data lowered rate hike expectations.
USD/MXN is falling for the seventh session in a row and is trading at 17.53, a level not seen since May 3, 2016. The downtrend momentum rose today on the back of a decline of the greenback. The US Dollar Index broke 95.20 and fell to 94.90, hitting a fresh 2017 low.
Bearish extension after key break
From a technical perspective, the pair is clearly oversold but the bearish momentum remains strong with no signals of consolidation. It continues to look for support.
Two days ago, USD/MXN smashed up a medium-term support area around 17.80 and clear the way to more losses. Since then it has fallen more than 1.50%M. To the downside, support levels could be located at 17.50, followed by 17.30 and the strong 17.05 (2016 low).
Traders could start considering that the pair is due for some consolidation after a 5% slide is seven days. How far can it go without a correction?
Trump, rates, Yellen and oil
During last week, expectations of a slower pace of policy tightening from the Federal Reserve helped emerging markets assets and the Mexican peso received extra support after a major oil discovery in the Gulf of Mexico.
Prior to that, the Mexican peso was already significantly higher against the US dollar with an 18% rise since January. An improvement in the US-Mexico relationship, confidence that a new NAFTA agreement will be reach and Banxico interest rate hikes were the main drivers of the rally.
USD/MXN is about to post the lowest weekly close since April 2016 and is moving toward last year lows.
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