USD/MXN jumps back above 19.20 on risk aversion

• US Dollar rises against Emerging market currencies as equity prices slide across the globe. 
• USD/MXN testing level on top of 19.20, next target at 19.30. 

The USD/MXN pair fell earlier today to 19.06 but later rebounded sharply approaching to yesterday’s top. As of writing trades at 19.21, up almost 15 cents from yesterday’s close, having the best day in weeks. 

The move higher took place amid a stronger US Dollar across the board on the back of risk aversion. Equity prices in Wall Street are falling with the Dow Jones down 0.79% and the NASDAQ 0.38%. Concerns about the US/China trade deal negotiations weighed on market sentiment. 

USD/MXN: A bottom in place? 

If the pair holds around current levels it would be breaking a consolidation range, signaling a potential bottom at 19.01 (Monday’s low, the weakest level in almost three months). The rebound in USD/MXN is about to face the 20-day moving average that stands at 19.24. Above that level, attention will turn to the 19.30 strong resistance area. A slide back below 19.15 would alleviate the bullish tone. 

“The MXN’s recent rally in tandem with some improvements on the global trade picture and US official comments on USMCA ratification. Nevertheless, headlines surrounding this topic should continue creating volatility going forward and we see limited room for a sustained appreciation in the peso from these levels”, said Luis Hurtado, analysts at CIBC. 

Analyst at CIBC maintain a 19.9 USD/MXN year-end forecast, and expect Banxico to cut the overnight rate by 25 bps in November, and by another 25 bps in December.