USD/MXN jumps to test July highs near 20.80, EM currencies under pressure

• The Mexican peso resumes the decline versus the dollar.
• USD/MXN likely to rise further while above 20.70.
• USD/COP and USD/CLP hit record highs.

After a two-day correction, the USD/MXN resumed the upside and jumped to 20.78, matching the July high. A stronger US dollar across the board boosted the pair on Monday as risk aversion prevails.

In Wall Street, the Dow Jones is falling by 0.38% and the Nasdaq slides by 2.01%. US yields are sharply lower as the demand for Treasuries strengthens as investors look for safety.

Emerging markets under pressure

Stocks are also falling in Emerging Markets. Mexico’s IPC drops 0.51%, Brazil’s Bovespa tumbles 1.70%. Among currencies, the Chilean peso and the Colombian peso hit a new record low. USD/CLP traded above 1,000 and the USD/COP above 4,500 for the first time. The USD/BRL (Brazilian real) is up 1.78% at 5.34.

The negative global growth outlook and higher interest rates contribute to keep driving the dollar higher versus EM currencies, including the Mexican peso.

The USD/MXN is testing the July high and as long as it remains above 20.70 more gains seem likely. The next resistance is located at 20.90, the last defence to 21.00. On the flip side, a decline back below 20.45 would alleviate the bullish pressure.

Technical levels