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The Peso Is Getting Pounded

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The Mexican peso has been sliding for a couple of days as NAFTA negotiations continue but, as Citi notes, today's tumble - the biggest drop in 4 months - is not about NAFTA...

This does not appear to about NAFTA since the Loonie is trading well today and with no announcements expected today, it looks like the peso move is to do with AMLO and positioning more than anything.

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Citi FX explains:

On this point, recall that USDMXN found a bid late Wednesday as markets began to reconsider the risk premium for AMLO. The presidential frontrunner has a comfortable lead in polls and recently threatened to kill the next Mexico City USD13bn airport project.

At this juncture, it looks like some unwind of crowded MXN longs is taking place. We have seen decent outflows pick up in the latest leg of the move from both fast money and real money names.

Large speculators are extremely long the peso...

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18.50 is the nest key level of support...

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