USD/MXN Price Analysis: Upside pressure eases, support seen at 20.40

• USD/MXN retreats after reaching on Wednesday the highest level since June at 20.64.
• A correction of the US dollar favoured a consolidation around 20.50.
• Banxico is expected to raise key interest rate by 25bps.

The USD/MXN is flat on Thursday, hovering around 20.50. It is consolidating after rising on Wednesday to 20.64, the highest level in three months. The key driver in the cross continues to be the US dollar.

In a few hours, the Bank of Mexico will announce its decision of monetary policy. A 25bps rate hike is expected. A larger hike should be positive for the Mexican peso. The currency has been among the worst performers during the week.

From a technical perspective, indicators are starting to turn south, like the RSI, a sign that USD/MXN is due for a consolidation or correction in the short-term before resuming the upside. A strong support is seen at 20.40 and then 20.20. The new range could be between 20.40 and 20.60. A decline under 20.00 should negate the bullish bias and would point to a stronger MXN ahead.

On the upside, a close above 20.55 would point to further gains and a potential test of the June high at 20.75, that protects the next resistance around the 21.00 zone.

USD/MXN daily chart