USD/MXN drops to lowest in a week, near 22.40

• Mexican peso up versus US dollar for the third consecutive day.
• Ongoing rally in Wall Street drives demand for riskier assets, favoring MXN.

The USD/MXN continues to slide from the one-month it reached on Tuesday at 23.23, and it recently dropped to 22.39, reaching the lowest in a week. As for writing, it is hovering around 22.50 off lows, holding a bearish bias.

Risk appetite across financial markets boosted the demand for the Mexican peso. US stocks are up by around 1% on average supported again by US economic data. June’s employment numbers surpassed expectations with the biggest monthly job creation on record.

The better tone across markets eased after new COVID-19 cases in the US, but still main indexes held in positive territory, supporting the demand for emerging-market assets.

Technical outlook

The USD/MXN broke a short-term uptrend line and extended the slide. At the moment, the pair is testing the 20-day moving average 22.42 after the 55-day moving average capped the rally at 23.15.

A close clearly below 22.40 would point to more losses, targeting 22.30 and below the next strong support stands at 22.05.

A rebound from current levels back above 22.80 would strengthen the greenback favoring a return to 23.00 and a test of the 55-day moving average.