USD/MXN unstoppable approaches 19.50

• Mexican peso, the worst performer
• USD/MXN breaks key technical resistance at 19.30.

The Mexican peso is among the worst performer on Monday as USD/MXN continues to rally. The pair reached a 4-month high on the back of a stronger US dollar. The greenback extended last week gains against emerging market currencies.

The USD/MXN pair broke above the strong 19.30 resistance and climbed to 19.48, reaching the highest level since January 3. Near the end of the session was hovering near the highs with the bullish tone intact.

Not even higher crude oil prices eased the upside pressure on the Mexican peso on Monday. Pressure on emerging market currencies is the main driver of the USD/MXN. The US Dollar is sharply higher versus the Chilean Peso and Brazilian real, posting gains of around 1%.

Since mid-April, USD/MXN has risen more than 8%. The Mexican peso is no longer the best-performing currency year-to-date. The recent slide pushed USD/MXN near the level it closed last year.

Between data, politics and again, MXN

Beyond US Dollar strength amid higher US interest rates, the main risk in the short-term for the Mexican peso appears to be domestic politics ahead of the July 1 presidential elections. Also ongoing NAFTA negotiations represent a risk. Talks resumed today in Washington. Commerce Secretary Wilbur Ross showed optimism about reaching a deal but warned that talks could go on for months.

Regarding Mexican economic data, on Wednesday CPI data will be released. It is expected to confirm the decline in the annual rate from 5.04% to 4.6%, the lowest since 2016. With inflation moving toward the 2-4% target, the pressure on the Bank of Mexico eased. The central bank left interest rate unchanged last month at 7.50%. The next meeting is May 17 and again it is expected to remain on hold. If the peso continues to depreciate at a quick rate, expectations about a rate hike are likely to grow.