• US dollar corrects lower across the board, trend remains positive.
• Mexican peso’s recovery limited so far.
• USD/MXN to gain momentum if it rises above 20.40.

The USD/MXN is about to erase all losses and is back near a critical technical level, showing that the strength is still in the dollar. The correction from the one-month hit it reached on Thursday at 20.63, extended to 20.28. Later the pair rose back to the 20.40 area.

Despite the correction and the failure of the USD/MXN to hold clearly above 20.40, risks remain to the upside. At 20.45, the 200-day Simple Moving Average (SMA) stands, a daily close above should clear the way to more gains. The next strong resistance is seen at around 20.70.

On the downside, the USD/MXN could drop even further to 20.20 without changing the bullish bias. The 20.15/20.20 zone could be seen as an opportunity to buy the pair again. A break lower would expose the 20-day SMA at 20.07. A slide back under 20.00 would negate the short-term bullish outlook, leaving the dollar vulnerable.

The weekly chart shows USD/MXN far from the peak (a positive for the MXN) and the 20-week SMA (a relevant technical level) is at 20.44.

USD/MXN daily chart