USD/MXN breaks key level and hits 9-month highs above 19.50

• Dollar rises to highest since March against Mexican Peso. 
• Mexican annual inflation rises during the first half of December. 

The USD/MXN pair is rising more than 1% on Thursday. The Mexican peso is among the worst performers. 

The US dollar reached today the highest level since March against the peso. USD/MXN gained momentum after breaking the key 19.30 resistance area. It peaked at 19.53 and then pulled back modestly. It was trading at 19.46, up 1.25% from yesterday’s close. The greenback resumed the upside that started back in September and paused during November. 

Inflation and politics 

The peso weakened yesterday after news report alleged that the Finance Ministry funneled money to political campaigns from the ruling party. The currency was already weak affected by the US tax reform. 

Today the rally in USD/MXN started after inflation data. Mexican annual inflation rose modestly during the first half of December to 6.69%. Policymakers remain unable to push inflation to the downside. Last week the Bank of Mexico rose its benchmark interest rate by 25 basis points to 7.25% (9-year highs). 

USD/MXN Technical levels 

To the upside, the key resistance now has become 19.50: a consolidation on top would clear the way to more gains with a potential target at 19.90 with intermediate resistance at 19.70. On the flip side, the area around 19.30 is a strong support, followed by 19.15 and 18.90.