The Mexican Peso (MXN) lost ground against the US Dollar (USD) on Friday, erasing earlier gains. This reversal comes despite the Bank of Mexico’s (Banxico) decision to maintain its benchmark interest rate at 11.00%.
Banxico Holds Rates Steady:
- Inflation Concerns: Citing a recent uptick in inflation, Banxico opted to keep rates unchanged.
- Revised Inflation Forecast: The bank acknowledged ongoing disinflation but upwardly revised its inflation projections for the next six quarters.
US Consumer Sentiment Dampens Greenback:
- UoM Consumer Sentiment Downturn: The University of Michigan’s consumer sentiment survey revealed a decline in US consumer optimism, impacting the Dollar’s performance against the Peso.
- Fed Officials Divided: Recent comments from Federal Reserve officials regarding potential rate cuts have created uncertainty in the market.
USD/MXN: Technical Analysis
- USD/MXN Downtrend Persists: Despite the Peso’s recent weakness, the overall downtrend for the USD/MXN pair remains intact.
- Momentum Favors Sellers: The Relative Strength Index (RSI) staying in bearish territory suggests a continuation of the downtrend.
- Support Levels: A break below the 50-day SMA (16.79) could trigger further losses, with potential support at the 2023 low (16.62) and the YTD low (16.25).
Resistance Levels:
- 100-Day SMA: A move above the 100-day SMA (16.92) could signal a temporary upside correction.
- 17.00 Psychological Level: A breach of 17.00 could expose the 200-day SMA (17.17) and potentially lead to a test of the January high (17.38) and the YTD high (17.92).
The Mexican Peso’s recent weakness against the US Dollar appears to be temporary. The underlying trend suggests continued depreciation of the USD/MXN pair, supported by the technical indicators and Banxico’s hawkish stance.
