18.00 gives way: peso gains 12 centavos to 17.95 and yesterday's line triggers

Good morning!

Yesterday I drew the line: I'd lean back to the peso if USD/MXN broke below 18.00. Overnight it did.

18.00 breaks and I act on my own line

The trigger fired. USD/MXN opens at 17.9480, 12 centavos below yesterday's 18.0715 close. I said I'd act, so I flip from neutral to pro-peso.

Accountability first: my pro-dollar call from September 29 was invalidated today, with the pair moving just -0.13% over the five sessions. I read dollar strength that never showed up.

A constructive tape with a crack in Treasuries

The backdrop is friendly. The S&P closed at 7,774 (+0.66%), near its record, and the VIX at 15.33 reads calm on the equity side. That lifts the Risk On score to 60 from 50.

The crack sits elsewhere. MOVE jumped to 113.59, more than one and a half times its normal daily step — the nerves are in the bond market while stocks stay quiet. Call it the concession against an otherwise clean read.

Crude helps too: WTI sagged -2.45% to 87.24, a tailwind for an oil-linked currency. The 10Y eased 3bp to 5.28% and goes along, though rates and the peso have drifted apart this month.

Thin rate premium, crowded book

If you're running short dollar hedges, what moves you today is crude and global risk rather than the rate edge: the Banxico–Fed gap is down to 2.62pp, thinner than a few months back, dragging the carry subindex (sub 37).

Watch the other side of the book. Chicago specs are still net long the peso by 52,402 contracts as of September 29, but they trimmed nearly 23k on the week — the consensus is already positioned, with less fresh ammo to push.

The pair arrives stretched, almost four times its typical range above its 20-day mean, so the move down has room but isn't free. Mexico's CPI on Thursday is the next local judge.

I stay with the peso while it holds below 18.00; a close back above 18.30 sends me to the dollar.

— See you tomorrow for Wednesday's view.