USD/MXN drops further on Friday, MXN the best of the week
- MXN extends gains on Friday, becomes the best performer in EM.
- USD/MXN breaks another strong support.
- The dollar has worst week since July in Mexico.
- Banxico Governor: Peso is undervalued.
The Mexican peso extended its weekly gains on Friday and ended as the best performer among the most-traded currencies. Against the US dollar, it had the best week since July.
Today, on a quiet day for markets in Latin America, the peso received another boost from Bank of Mexico Governor, Agustin Carstens. He mentioned that the peso is “undervalued in general terms”. Prior to today, the currency was already sharply higher for the week, supported mainly by some optimism about a deal on the North American Free Trade Agreement (NAFTA).
Also, the rally in crude oil prices that reached a fresh 2-year high, the slide of the US Dollar across the board and an improvement in global risk appetite, were behind the gains.
Carstens last week at Bank of Mexico
Banxico Governor or Presidential candidate? Is the probable future of the current Finance Minister Jose Antonio Meade. Carstens will leave his position next week and President Nieto has not yet named a successor. Meade appears to be the main candidate but he is also being mentioned as the potential presidential candidate of the ruling party.
USD/MXN Technical levels
The USD/MXN pair lost almost 2% during the week. Last week offered signals about a bearish breakout after testing levels under 18.90. It confirmed the break of 18.90 on Tuesday and it began to fall more quickly. On Friday completed a 4-day slide after falling below 18.58/60, another strong support. It bottomed at 18.51, the lowest since October 6.
The short-term momentum favors the downside but many technical indicators are showing extreme oversold readings. No signals of an upside correction are seen so far.
The area around 18.50 is now the immediate support, followed by 18.30 and 18.05/10. To the upside, resistance levels now are located at 18.70 and 18.90 that only five days ago were seen as relevant supports.