USD/MXN retreats further and drops below 18.00

The Mexican peso is rising for the third day in a row against the US dollar. USD/MXN is back under 18.00 as it continues to retreat after reaching last week 18.40. Crude oil is higher today giving some support to the Mexican peso. 

Last week the pair ended unchanged. It peaked at the mentioned 18.40, the highest in a month but then turned to the downside. Today it bottomed at 17.88, the lowest since June 29. It is trading at 17.97. 

Market volatility remains low on Monday and some analysts consider that it could continue that way until Wednesday amid a light economic calendar. In the US, the key event will be Janet Yellen testimony to Congress on Wednesday and retail sales and CPI data on Friday. 

“Mexico reports June ANTAD retail sales Tuesday.  It then reports May IP Wednesday, which is expected to rise 0.3% y/y vs. -4.4% in April.  The real economy remains sluggish, while price pressures appear to be topping out”, said analyst from Brown Brothers Harriman. 

According to BBH, an easing cycle from the Bank of Mexico seems warranted, but some central bank officials believe that it must keep pace with rates hikes from the Federal Reserve so that the interest rate differential is maintained. They expect no change at the next meeting, August 10. 

Levels to watch 

To the upside, resistance levels might be located at 18.10 (daily high), 18.30 and 18.40 (Jul 5 & 6 high). On the flip side, support could be seen at 17.88 (daily low), 17.80 (Jan 26 & 29 low).