Key Points:
- The Mexican Peso stabilised at 18.20 MXN/USD after a 1% loss, influenced by political factors.
- The Peso broke a four-year-old resistance trendline, indicating potential further weakening.
- Improved risk appetite among investors despite European turmoil; the US dollar remains strong.
On Monday, the Mexican Peso showed signs of stabilisation against the US dollar, settling at an 18.20 MXN/USD exchange rate. This stabilisation comes after a slight loss of 1% in its value. The recent stability of the Peso can be attributed to several political factors. Remarks from outgoing President Andres Manuel Lopez Obrador have played a crucial role, alongside the insistence on reforms by the Morena Party leader Mario Delgado. Initially submitted in February 2024, these reforms have significantly impacted investor confidence and the overall perception of the Mexican economy.
Technical Analysis: MXN/USD Breaks 4-Year Resistance at 18.65
From a technical perspective, the Mexican Peso exhibits a bearish bias. The recent high was recorded at 18.65 MXN/USD, with the current rate at 18.20. On 7 June 2024, the Peso broke a four-year-old downslope resistance trendline from an all-time high (ATH) of $25.77. This break indicates a significant technical development, suggesting a potential further weakening of the Peso. Key resistance levels to watch include 18.48 (6 October 2023), 18.65 (10 June 2024), 19.00 (psychological level), 19.23 (20 March 2023), and the major psychological level of 20.00. On the support side, 18.15 (19 April 2024) is crucial to maintain the pair within the 18.00-18.15 trading range.
Peso Steady as Investors’ Risk Appetite Rises Amid Turmoil
The broader market context shows an improved risk appetite among investors despite European political turmoil, which has adversely affected emerging market currencies. The US dollar remains firm against six currencies, indicating strong support for the greenback. The Federal Open Market Committee (FOMC) interest rate decision scheduled for 12 June 2024 is an upcoming event that could further influence currency markets.
MXN/USD Hits 14-Month Low at 18.65 on 7 June 2024
On 7 June 2024, the Mexican Peso hit a 14-month low, reaching an exchange rate of 18.65 MXN/USD. This period marked a significant downturn in the currency’s performance, exacerbated by a fifth consecutive daily close above the critical four-year-old downslope resistance trendline. An analyst noted that Monday’s break of the four-year-old downslope resistance trendline, drawn from all-time highs around $25.77, marked the fifth consecutive daily close above this level, which could signal the end of the Mexican Peso’s strength.
