USD/MXN drops toward 18.00, at lowest since August

The Mexican peso continued to rise against the US dollar and is now above the level it had before the US presidential election. USD/MXN is moving toward 18.00, as it falls for the fifth day in a row. 

The pair bottomed at 18.06, the lowest since August. It is trading at the lows, holding a strong bearish momentum. It is headed to test the 18.00 handle. The area between 18.00 and 17.90 could be seen as a relevant support. 

Before the Fed

The impressive rally of the Mexican peso continues. Since January it rose more than 15% against the greenback. An improvement in the relationship between the US and Mexico and the tightening cycle from the Bank of Mexico helped the peso. 

Tomorrow the Federal Reserve will decide on interest rates. A hike is expected and if that turns out to be the case, next week, Banxico could do the same. 

The central bank of Mexico tends to follow the Fed but during the last year, it was forced, first by a sharp decline of the peso and later by rising inflation, to start rising rates. In May, the CPI rose above 6.0% (YoY) for the first time in 9 years. So, despite the appreciation of the Mexican peso, some analysts continue to expected rate hikes from Banxico, even if the Fed stays on hold, to show its strong commitment against inflation.