As concerns over intervention by Japanese and US authorities intensified, the Mexican peso/yen pair fell below the ¥9.00 milestone and plunged into the ¥8.70 range. The downtrend remains in place, with selling into rallies continuing to exert downward pressure.
Last week, the Mexican peso/yen pair traded in the ¥9.40 range, supported by higher oil prices and high interest rates. However, remarks by Japanese and US authorities warning against yen depreciation became a turning point for the market, and buying of the yen accompanied by peso selling spread, pushing the pair well below the psychologically important ¥9.00 level toward the end of the week. At the start of the following week, it fell to around ¥8.79, after which trading remained range-bound around ¥8.80 to approximately ¥8.89.
Technically, the ¥9.00 milestone has become resistance, and a moving-average death cross has also been indicated, suggesting that the pair is in a long-term downtrend. The current resistance zones are formed at ¥9.08-9.10, ¥9.00-9.02 and ¥8.89-8.90, in that order, while downside reference levels extend to ¥8.74-8.75, ¥8.60-8.65 and ¥8.50-8.52.
The focus this week is how far the pair will extend its decline amid intervention concerns. The main scenarios are continued selling into rallies and a recurrence of risk aversion driven by higher oil prices. Under the former scenario, even a rebound to the upper ¥8.80s or around ¥8.90 would likely face resistance, with a break below ¥8.74 expected to open the way toward the ¥8.60 range. Under the latter, a rise in oil prices and a recovery in risk appetite could allow the pair to break above the ¥8.90 range and recover ¥9.00, although intervention concerns are currently considered the dominant factor.