USD/MXN: Mexican peso, the best of the week

• Mexican peso gained more than 4% against the US dollar, having the best week in years.
• Leftist president-elect Andrés Manuel López Obrador’s tone calmed investors and boosted the currency.

The Mexican peso was the top performer over the week among the most-traded currencies, supported by easing fears about López Obrador policies. USD/MXN rose modestly on Monday and even reached 20.20; since then lost 5.75%.

On Friday the pair bottomed at 19.03, the lowest since early May. The area above 19.00 capped the decline and it was about to end the week hovering around 19.05/10.

From last month’s highs, USD/MXN fell 9.10%. Back then the currency approached 21.00 on a sharp rally that contributed to the decision of the Bank of Mexico to raise interest rates to 7.75%, the highest level since 2009.

Yesterday, the minutes of that meeting showed that Banxico could raise rates further. The central bank acknowledged a deterioration in the inflation outlook. The recent appreciation of the peso is likely to keep Banxico out of the trigger for the moment.

USD/MXN Levels to watch

The area around 18.95/19.00 is a key support and if the pair holds on top a correction seems likely. If it breaks lower, targets might be located at 18.75 and 18.60. To the upside, resistance levels might be seen at 19.15, 19.30 and 19.45.