MXN: Ready To Rumble
April 2008 | Currency ForecastIf you would like to subscribe to Emerging Markets Monitor and gain instant access to this article, please click here to subscribe.
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Since we started talking up the Mexican peso's prospects at the beginning of April, the currency has come into its own, bursting through 10-year resistance at MXN10.60/US$ to trade at a two-year high of MXN10.45/US$. With the relative strength indicator suggesting we may be in overbought territory, a short-term peso retracement would not be a major surprise, affording speculators the opportunity to take profits. In the case of a correction, decent short-term support exists at MXN10.51/US$. Nevertheless, we continue to favour further upside. Fundamental support is offered by high oil prices and the outlook for a widening interest rate differential with the US. We are eyeing up gains towards MXN10.40/US$, a clean breach of which could see the unit rally towards our end-2008 target of MXN10.20/US$.