USD/MXN rebound toward 21.80 from two-month lows and erases losses

• Mexican peso’s rally losses momentum after hitting hard resistance.
• USD/MXN biased to the downside despite rebound but some consolidation likely.

The USD/MXN bottomed on Wednesday at 21.50, the lowest level since March 16 and then rebounded, erasing losses. It is about to end the day flat, hovering around 21.75/80. The rally of the Mexican peso found resistance at 21.50.

Emerging market currencies pulled back during the American session but remained support by constructive risk appetite. The Brazilian real outperformed again and USD/BRL approached 5.0.

The greenback dropped again across the board, with the DXY approaching 97.00. The dollar could remain weak while the risk rally continues. US economic data came in better-than-expected, but had no impact on markets.

Technical outlook

The rebound in USD/MXN takes place after three consecutive days of declines. Still the trend point to the downside and a slide back under 21.60 could increase the bearish pressure. The next strong support is seen at 21.30. On the upside, the immediate resistance stands at 22.05/10.

The sharp decline in the pair and the rebound from 21.50 could suggest some consolidation ahead. The USD/MXN dropped in eleven out of the last twelve trading sessions, so a modest correction or a consolidation seems overdue.