• USD/MXN turns negative, after hitting weekly highs near 20.30.
• A recovery in market sentiment helped the Mexican peso during the American session.
• A consolidation above 20.20 is likely to trigger more gains.

Emerging market currencies recovered ground during the American session from multi-day lows. They remain under pressure affected by the sharp decline in global stocks. The negative growth outlook and monetary tightening from the Fed weigh on currencies like the Mexican peso.

The USD/MXN peaked on Thursday at 20.26, the highest level in a week. Later as stocks recovered, pulled back erasing gains. Despite moving off highs, the outlook is biased to the upside. At the first attempt, the dollar was rejected from above 20.20. If it posts a daily close above it could rise further to the next resistance at 20.45. The 20.20 area is reinforced by the 100-day Simple Moving Average.

While under 20.20, some consolidation between 20.20 and 20.00 seems likely before the next directional move. A decline back to 20.00 should be seen as a normal correction after the rally from 19.80 to 20.20. 

A decline under 20.00 and below the 20-day SMA should strengthen the Mexican peso, favoring an extension toward the weekly low at 19.81. The key support below is the 19.70 area that if reached, could likely trigger a rebound.

USD/MXN daily chart