USD/MXN rebounds above 24.00, after falling 23.75 on crude oil rally
- Mexican peso erases losses versus the US dollar after crude oil prices surge.
- USD/MXN again rejected from below 24.00, remains in a consolidation range.
The USD/MXN tumbled from levels near 24.50 to 23.75, in a few minutes after the beginning of the American session following another leg higher in crude oil prices. The Mexican peso failed to hold to gains, and USD/MXN climbed back above 24.00. As of writing, it trades at 24.15, modestly lower for the day, showing signs of consolidation.
The recovery of the Mexican peso was triggered by comments from US President Trump about the oil market, suggesting an agreement to end the price war. The WTI jumped to $27 before easing to $24.50. It is up by more than 20%. The rally boosted equity prices in Wall Street and emerging market currencies.
However, USD/MXN was rejected from below 24.00 and climbed back above. The Mexican peso trimmed losses across the board, but it continues to be among the weakest. From last week, the pair rose 5.40%, only surpassed among EM currencies by the USD/ZAR (+6.90%).
USD/MXN outlook
The USD/MXN is consolidating around 24.00. On the upside, the area around 24.50 is offering strong resistance. A break higher could clear the way for a test of 25.00. On the flip side, if the Mexican peso manages to hold under 24.00, a correction to 23.40 will be on the cards.
Considering the magnitude of the recent rally, more gains above 25.00 in USD/MXN seem unlikely. However, if panic and volatility return to markets, the Mexican peso could drop further versus the US dollar.