USD/MXN drops toward 18.30, hits fresh multi-year lows

• Mexican Peso outperforms among emerging market currencies.
• USD/MXN holds near multi-year lows, despite risk aversion and higher US yields.
• Strong support emerges around 18.30 while critical resistance seen at 18.50.

The USD/MXN reversed after reaching a daily high near 18.50 and dropped to 18.35, matching the lowest level since 2018. The pair continues to move with a bearish bias despite risk aversion.

Looking at the FOMC minutes

Market participants await the outcome of the minutes from the latest FOMC meeting. They will look for clues about the future of US monetary policy.

Ahead of the minutes, the US dollar holds firms in the market supported by higher US yields and risk aversion. The latest round of economic numbers showed an unexpected recovery in the service sector, favoring expectations of a hawkish Fed.

Despite higher US yields, a firmer dollar and a deterioration in market sentiment, the Mexican Peso continues to rise versus the greenback. Among emerging market currencies, the MXN is one of the best performers of the last week and also over the last 30 days.

The Mexican Peso is receiving support from Banxico which is seen raising rates again at the next meeting after a hawkish surprise at the latest board meeting.

Key levels

Bias in USD/MXN continues to be tilted to the downside. The area around 18.30 is the key support. A break lower could open the doors for a slide toward 18.00. A recovery above 18.50 should alleviate the bearish pressure.

Technical levels