USD/MXN approaches 18.00 as USD strengthens

The greenback rose against emerging market currencies amid risk aversion. EM stocks dropped on Monday on concerns after the German elections and amid new tensions between the US and North Korea. 

USD/MXN opened the week at 17.73 and moved all day with a bullish bias. It peaked during the American session at 17.93, the highest level since September 5. At the moment, it trades at 17.89, up 0.85% for the day, the biggest daily gain in almost a month. 

The Mexican peso failed to benefit from the rally in crude oil prices. The WTI barrel is rising almost 3%, at the strongest since April. 

WTI climbs to the highest since April above $52.00

Banxico on Thursday 

Last week earthquakes had no relevant impact on the peso. During the current week, the key event will the Bank of Mexico meeting on Thursday. The central bank is expected to keep rates unchanged at 7.0%, particularly after last week FOMC decision. “Inflation is showing signs of topping out, but rates are unlikely to be cut until next year. Bloomberg consensus sees the first rate cut in Q2 2018, and we concur”, said analyst from Brown Brothers Harriman. 

USD/MXN Levels to watch 

To the upside, the key resistance to watch is the 18.00 area: a consolidation significantly on top would open the doors to more gains, with a potential target at 18.15. On the downside, the 20-day moving average at 17.74 is a level to watch: a daily close significantly below would clear the way for a test of 17.60 (Sep lows) that protects 2017 lows at 17.44/45.