USD/MXN finds resistance at 20.40 and drops back to the 20.30 area

• Mexican peso losses ground against US dollar but gains versus most of EM currencies. 
• USD/MXN continues to consolidate around 20.30. 

The Mexican peso failed to hold to gains versus the US dollar and weakened during the US session. The USD/MXN bottomed earlier at 20.19, slightly above Friday’s low but then turned to the upside. It hit a daily high at 20.39 and then pulled back to the 20.30 zone, where is trading, posting modest gains for the day. 

Concerns about the global growth outlook weight on Emerging markets currencies and pushed the greenback so the upside on Monday. It posted strong gains versus the Indian rupee and the South African rand. The peso outperformed at the beginning of the week by posting limited losses against USD. 

USD/MXN Technical outlook 

The pair is consolidating around 20.30. To the upside, resistance is likely to emerge at 20.50 and then around 20.65. A daily close significantly above 20.65 is needed to clear the way to more gains and would open the doors for a test of YTD highs at 20.95/21.00. 

On the flip side, a consolidation under 20.20 would expose the 20.00 area (last week intraday low) that is likely to limit any decline. A break lower could signal that a peak is in place. 

The main trend continues to point to the upside, but the US dollar shows no strength at the moment to extend gains, and at the same time the 20-day moving average is turning flat, but the downside also shows no impulse.