USD/MXN: Mexican Peso's Momentum Fades as Global Growth Concerns Mount

The Mexican peso is one of top-performing currencies of the year and that trade is starting to lose momentum. The interest rate differential (Banxico overnight rate stands at 11.25%) and robust economic growth prospects have made the peso a very attractive trade this year. A weakening global growth outlook however will start to dampen prospects for EM currencies. Emerging markets need their key trading partners to thrive and China’s disappointing economic recovery is triggering some profit-taking.
USD/MXN has major support at the 17.00 level and if a rebound emerges, upside could target the 50-day SMA around the 17.45 level. Given the softening outlook for the next year, peso weakness to the dollar could eventually target the 20.00 level.