USD / MXN Forecast: Bear
USD / MXN has been relatively stable from where I left off last week, with some attempts to break down and limited bullish momentum. Even after the NFP data came out stronger than expected and the dollar rallied some bids along the way, the pair having seen one of its most stable weeks in the past two months.
Now this could be a sign of stable repositioning and balanced forces, or investors may have completely lost interest in USD / MXN this week. Looking at the volume data, it seems to be more of a case than the first. y wouldn’t be the first couple to be clouded by indecision after a relatively busy few weeks, so the question now is where do we go from here.
This solid employment reading seen on Friday is the latest piece of the Fed policy puzzle that has been in business for a long time. With inflation reaching the necessary conditions for a long time to begin to be less accommodative, it was just a labor market that showed the same progress and had been resisting for a few months. Now that more than 800,000 jobs were added in July, I expect markets to become more optimistic about the likelihood of Fed announcing tapering at the Jackson Hole symposium later this month, with the US dollar increasingly bullish by its side. . If they don’t, it will be a huge disappointment and a kick in the stomach for the dollar.
On the peso side, Banxico will hold the August interest rate decision meeting on Thursday. Market expectations have risen for the bank to raise the benchmark rate by 0.25 basis points to 4.5%, which would be a consecutive increase after June’s 0.25 basis point increase to 4.25%. If so, this would likely ease the peso a bit and make the Mexican currency more attractive to those investors looking for commercial advantages. US IPC and PPI data next week will also be something to watch out for as it could move the dollar and thus make the USD / MXN more volatile.
USD / MXN daily chart
Despite Wednesday’s bullish breakout attempt, USD / MXN was capped at 20 pesos, which is a good sign that sellers are firmly back in place. This is also an area where the 20-, 50-, and 100-day SMAs are converging, making it even more significant as resistance going forward. If it continues through this week, sellers will look for a break below 19.80 to further consolidate momentum as the stochastic oscillator begins to show overbought conditions.
Fibonacci Confluence in FX Pairs
– Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on @HathornSabin
Read also ECB is expected to slow down the EUR / USD bullish movements next week
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