USD/MXN tumbles toward 19.10 as the dollar drops sharply on Fed rate cut

• Mexican peso and emerging market currencies jumped after emergency rate cut from the Fed. 
• USD/MXN extends bearish correction, moves further away from 20.00.

The USD/MXN tumbles from the 19.50 area to 19.14 in a few minutes after the Federal Reserve announced a 50bps rate cut. The pair is trading at 19.20, significantly lower for the day. 

The greenback dropped sharply across the board after the US central bank cut the Fed Funds rate in an unexpected move. According to the Fed, the coronavirus exposes evolving risks to economic activity. The central bank is giving stimulus in order to avoid sharp disruptions to the economy following the spreading of the coronavirus and global market’s selloff. Fed Chair Powell is delivering a press conference. 

The US dollar collapsed across the board. The DXY hit fresh monthly lows near 97.00. The decline was even more significant versus emerging market currencies. USD/TRY is falling 1.65% and the USD/RUB 1.50%. Equity markets rose while US yields move lower but held above recent record lows. 

Levels to watch

The USD/MXN was testing the relevant technical level around 19.50 before the sharp decline. The immediate support now might be seen at 19.10/15 and then the 19.00 area. The previous support level of  19.35 is now resistance, followed by 19.50. A recovery above 19.35 would ease the bearish pressure.