MXN remains well supported - Rabobank

MXN remains well supported with low volatility and rising rates driving demand for carry according to Christian Lawrence, Senior Market Strategist at Rabobank.

Key Quotes

“Without a spike in volatility or negative news relating to US trade policy, MXN buying will continue to dominate price action.”

“USD/MXN broke down through key support at 18.50 and the confirmed close below that level has opened up a move down to the 18.1634 low seen on 9th November 2016. A look at momentum indicators shows the pair firmly in neutral territory with no clear trend although price action implies that momentum is starting to build up to the downside. In terms of the main upside levels to watch for, a break back above 18.50 would be the first stop before 18.725, which marks the 50 day moving average that held price action well over the past month. Above there, it is the 19 handle that will be in focus.”

“DTCC options data shows that, as it stands, expiries below a 19 strike are heavily dominated by puts while those north of 19 are predominantly calls. We maintain the view that low volatility and a relatively flat skew provides a good opportunity for clients to hedge USD/MXN risk through the options market.”