Against a backdrop of a correction in U.S. technology stocks and the Bank of Japan's hawkish stance, the Mexican peso/yen pair plunged from around ¥8.50 to the low ¥8.30 range before forming a double bottom and rebounding to the ¥8.41 range. The pair is expected to remain in a range of ¥8.36–¥8.48.
From the latter half of last week into this week, a correction in U.S. technology stocks coincided with the Bank of Japan's hawkish stance, sending the Mexican peso/yen pair sharply lower from around ¥8.50 and briefly down to the low ¥8.30 range. After the sharp drop, dip-buying by real-money investors was observed, and a double bottom formed on a daily basis. The pair rebounded to the ¥8.41 range to end the week.
Looking at intraday price movements, the pair reached the ¥8.36 range on the 26th and tested around ¥8.50 on the 27th. Thereafter, it traded mainly around the ¥8.40 range, influenced by movements in U.S. equities and the content of the Bank of Japan's press conference. EN movements also affected the market at times, as dollar weakness and an unwinding of risk aversion after the FOMC spread through.
On the fundamental side, concerns over U.S.-China trade, expectations of central-bank rate hikes and stable oil prices are supporting factors for the peso. At the same time, some market participants believe that the risk of a carry-trade unwind remains, depending on U.S. employment data and the performance of major technology stocks.
Technically, a double bottom was confirmed with ¥8.30 as a key downside level. The current outlook assumes a range of ¥8.36–¥8.48, with the psychological ¥8.50 barrier in focus on the upside and support expected around ¥8.36–¥8.37 on the downside.