USD/MXN jumps to 19.60 as world stock markets plunge

• USD/MXN resumes rally after a 1-day pause and gains almost 4% in a week. 
• US dollar heads for highest close since July 2 against the Mexican peso. 

The Mexican peso lost 1.5% against the US dollar on Wednesday amid risk aversion. The currency extended the weekly slide and it was about to post the lowest close since July. 

The USD/MXN rose from 19.25 to 19.62, in a few hours during the American session. The move higher accelerated as equity prices plunge in Wall Street. The Dow Jones and the S&P 500 erased gains for the year, hitting monthly lows. In Mexico, shares also plummeted adding pressure to the peso while Mexican bond yields remained near multi-year highs. 

The slide in equity prices took place amid disappointing earnings, concerns about EU and Italy over the budget and worries about the outlook for world economic growth. Most emerging market currencies lost ground versus the US dollar, among them, the Mexican peso was the second-worst performer. Domestic factors, like uncertainty regarding the under-construction airport as President-elect Andres Manuel López Obrador promoted  a public consultation to decide what to do. The move could be seen as a negative signal for private investment. 

USD/MXN Levels to watch 

The USD/MXN pair broke above the key resistance at 19.40 and also above the psychological 19.50. As of writing was trading at 19.59, holding the bullish tone intact. The positive tone is likely to remain in place while above 19.20 and a test of 19.65/70 (September highs) seems likely over the coming sessions. A break higher could open the doors to 19.90, the next strong resistance.