USD/MXN jumps to the 20.45 area as dollar soars on recession fears

• Emerging market currencies extend weekly losses on Friday.
• US dollar firm on risk aversion, DXY up 0.65%.
• USD/MXN testing critical resistance that contains the 100-week SMA.

The US dollar is rising against emerging market currencies on Friday, extending weekly gains boosted by global concerns about the growth outlook and as central banks raise interest rates. The Mexican peso is among the worst performers.

The USD/MXN jumped on Friday to 20.46, reaching the highest level in two weeks. It then pulled back to the 20.30 level. High volatility is likely to remain elevated as panic continues to drive price action.

After a brief pause, USD/MXN resumed the upside on Friday, adding to weekly gains. It started to move higher from 20.05 (20-day SMA). The rally found resistance at the 20.45 strong barrier that contains the 100-week SMA. A consolidation above should point to more gains. The next strong resistance is located at 20.70.

Fear almost everywhere

In Wall Street, the main indexes are in red but off lows. Bond yields are sharply lower, reflecting risk aversion and softer expectations about monetary tightening. Economic data from the US showed a larger than expected decline in ISM Manufacturing in June that fueled recession fears.

Despite the slowdown in activity, high inflation pressures the Fed and other central banks to tighten aggressively monetary policy. Higher rates are usually negative for emerging markets.

USD/MXN weekly chart