• US Dollar jumps against emerging market currencies amid a decline in commodity prices.
• Higher equity prices not helping the Mexican peso.
• USD/MXN reverses sharply and soars from 19.75, above the 20-day SMA.

The USD/MXN rose sharply during the American session, climbing from 19.75 to 20.07, the highest level in a week on the back of a stronger US dollar.

The greenback gained momentum against emerging market currencies as commodity prices declined. Gold tumbled from $1980 toward $1950, Silver from $25.75 to $25.10 and crude oil prices lost more than 3% during the last four hours.

Higher US yields are also helping the US dollar. The 10-year yield peaked at 2.92% and the 30-year reached levels above 3.00% for the first time since 2019. The DXY is up 0.10%, and climbed above 101.00.

In Mexico, President Andres Manuel Lopez Obrador’s project to restore state control of the electricity sector failed. Regarding economic data, on Friday mid-month inflation data is due. “Headline inflation is expected at 7.51% y/y vs. 7.29% in mid-March.  If so, inflation would continue to move above the 2-4% target range. Banco de Mexico delivered the expected 50 bp hike to 6.5% in March.  Minutes showed a range of views on further tightening but suggested there is a consensus to continue hiking rates at the current 50 bp pace.  Next policy meeting is May 12 and another 50 bp hike to 7.0% seems likely”, wrote analysts at BBH.

Technical outlook

The reversal in USD/MXN from the strong support area of 19.75 deteriorated the outlook for the Mexican peso. If the pair manages to hold above 20.00 (static resistance and 20-day Simple Moving Average), more gains seem likely, targeting 20.20.

A slide back under 20.00 during the next hours, should keep USD/MXN in the range between 19.75 and 20.00, favoring an extension of the consolidation bias.

USD/MXN daily chart

Technical levels