USD/MXN reverses sharply and rises back above 19.00

• US dollar rises sharply agings Turkish lira and Latin American currencies. 
• USD/MXN heads for the biggest gain in months and breaks key technical levels. 

One day after, the announcement of a US-Mexico trade deal, the Mexican peso reversed sharply and plummeted against the US dollar. The MXN was affected by a sell-off in Latin Americean currencies. Higher US yields, political uncertainty in Brazil and another slide of the Turkish lira boosted the demand for the greenback in the region. 

USD/MXN dropped to 18.70 earlier today and then rebounded almost 2% rising above the 19.00 area. Near the end of the American session was at daily highs at 1-week highs at 19.05. 

The agreement between the US and Mexico did not offer support to the Mexican peso. A deal was already priced in and also some concerns remain as the agreement needs to be approved by Congress. The greenback rose1.60% versus the Argentine to a new record high and climbed to 1.40% against the Brazilian real, to the highest close since 2016. 

On Wednesday, the Bank of Mexico will release its quarterly inflation report and in the US a new estimation of Q2 GDP growth is due.

Technical outlook 

USD/MXN broke above the 19.00 area and also on top of a downtrend line. The recent rally changed the short-term outlook to bullish, signaling more gains ahead. To the upside, resistance levels might be seen at 19.15 and 19.30. 

If the pair drops back below 19.00, upside pressure would ease. Below the next support is located at 18.85 followed by 18.70 (Aug 27 low).