USD/MXN retreats to 22.50 after hitting six-day highs near 22.70

• Mexican peso recovers during the American session as US stocks erase losses.
• USD/MXN continues to move without a clear direction, around 22.50.

The USD/MXN failed to hold onto gains on Monday. After reaching at 22.71, the highest level in six days, it pulled back 22.48. As of writing, it is hovering around 22.50, modestly lower for the day.

The recovery of the Mexican peso took place as US stocks turned decisively to the upside. The S&P 500 Index gains 0.88%, and the Nasdaq jumps 2.44%. The improvement in risk sentiment is helping emerging-market assets. Among currencies, the best performer so far is the Brazilian real, with USD/BRL falling almost 1%.

Technical outlook

Over the last weeks, the situation with USD/MXN has not changed much. The cross continues to trade sideways around 22.50. As with many EM currency pairs, volatility is low, and the direction is slightly biased against the US dollar.

On the upside, the critical level is seen around 22.75/80, an area of horizontal resistances and near the 55-day moving average. A daily close above would target 23.20, with interim resistance at 22.90.

On the flip side, the support level to watch in USD/MXN stands at 22.20. A consolidation below would expose 22.00; support levels below might lie at 21.90 and then not much until the 21.45 area (June low).