USD/MXN back below 22.50, Mexican peso rises sharply ending a five-day negative streak

• Mexican peso outperforms in the currency market on Wednesday.
• USD/MXN reverses from 22.90, trims weekly’s losses.

The USD/MXN is falling for the first time in more than a week, amid a weaker US dollar and as the Mexican peso outperforms. The pair dropped to 22.38, the lowest level since Monday, after hitting on Tuesday at 22.91, the highest level in a month.

The combination of technical factors, risk appetite across global financial markets and a weaker US Dollar pushed USD/MXN sharply to the downside. The Mexican peso is among the biggest gainers on Wednesday.

The DXY dropped to test the two-year low it reached last week near 92.50. The greenback is also falling versus commodity and emerging markets currencies as Wall Street prints gains. The Dow Jones rises 1.22% and the Nasdaq 0.35%.

Economic data from the US came in mixed but it was mostly ignored by market participants. The ADP report showed a lower than expected increase in private payroll (but a positive revision to June’s figures) while service sector indicators posted higher numbers than market consensus.

Technical outlook

The USD/MXN found resistance on Tuesday at the 22.90 area that capped the upside. The mentioned level continues to be critical and a close above would clear the way to more gains. Before that area, an intermediate resistance is now seen at 22.55.

The slide back under 22.50 alleviated the bullish pressure. On the downside, the next support is seen at 22.20/25. A close below would suggest the pair had peaked at 22.91 (Aug 3 high). But if USD/MXN rises back above 22.50, the bias will continue to point to the upside.