USD/MXN: Corrective mode intact while below $21 as oil rebounds
- Mexican peso benefits from the recovery in oil prices.
- Market mood improves after the recent coronavirus-led gloom.
- The spot ignores broad USD rebound alongside Treasury yields.
The USD/MXN pair keeps its corrective mode intact in Tuesday’s European trading, as it manages to hold above 20.50 levels following several attempts to take out the 21 handle over the last hours.
The Mexican peso recovers ground against its American counterpart, having fallen to the lowest level since January 2017 at 21.89 on Monday. Oil prices rebound nearly 8% so far, as investors resort to profit-taking after the slump while some market participants believe the fall to be excessive.
Amid the recovery in oil prices, the USD/MXN buyers fail to take advantage of broad-based US dollar rebound, fuelled by a sharp pullback in the US Treasury yields, as risk sentiment somewhat improves on global stimulus hopes to fight the coronavirus outbreak.
Monday’s 8% fall in the peso can be directly associated with the over 30% collapse in oil prices after Saudi Arabia cut its selling price for oil and stood ready to raise outputs. The Saud move was to avenge Russia’s refusal to accept the OPEC+ proposal to extend the output cuts.
In the day ahead, the oil-price action will continue to determine the MXN trades, as traders digest the latest comments from Russia’s Energy Minister Novak, which could stall the oil recovery and in turn cap the further upside in the peso.
USD/MXN technical levels to watch