USD / MXN Slides As US Treasury Yields Fall, Market Focus Shifts To NFP Data


  • Mexican peso appreciates at the beginning of the week as US Treasury yields continue to lose ground in the fixed income market
  • path of least resistance for USD / MXN appears to be lower on the back of the dovish Fed.
  • In this article we talk about the most important technical levels for the USD / MXN in the short term

More read: Powell paves the way for short-term USD / MXN weakness

USD / MXN fell cararately and racked up further losses earlier in the week after Friday’s sharp decline triggered by the Fed’s docile tone at the Jackson Hole Symposium. As a reminder, at the top, Jerome Powell cone disengaged from take-off, but more importantly, he did not commit to a timetable to start reducing asset purchases, a sign that politicians may be inclined to wait a little longer for departure. pick up accommodation.

dovish message from the central bank president has led investors to conclude that a “downsizing announcement” will not take place at the September FOMC conclave, but towards the end of the year at the November / December meeting, when the labor market it will be in a better position. se new expectations pushed US Treasury rates lower at the long end of the curve, with the 10-year yield falling from 1.35% to 1.2.8% in the last two days.

With treasury rates in retirement, the US dollar could fall further in the short term, especially against the high-yielding Mexican peso, one of the most attractive volatility-corrected carry currencies in complex EMFX. This means that the USD / MXN could lose more ground and easily fall below the psychological threshold of 20.00. entering the new month.

While the path of least resistance for the USD / MXN appears to be minor, there are risks to the bearish outlook that traders should pay attention to. That said to main threat this week is the US economic data, in particular the August Employment (NFP) report is expected to be released on Friday. Before Labor Day only (US scorers will close on September 6 for Labor Day). Evaluators expect to see 750,000 new jobs, with forecasts ranging from 450,000 to 950,000. Anything close to a million jobs could make the dollar shine, while anything below 500K should weigh on the dollar and boost EMFX.

In measuring the potential market response, it should be noted that liquidity is expected to be significantly lower before the holiday weekend, which coincides with the end of the summer / holiday season. A low liquidity scenario can produce an oversized reaction of the USDMXN Self Surprise NFP results in both directions, but the measure could be greater if the employment increases flying the estimates, as this could request trader to recalibrate the expectations and rekindle the bets of September with announcement.


In recent days, USD / MXN fell towards key support in the 20.20 / 20.10 area, where the August 25 low converges with the 200-day moving average. bears themselves maintain control of the market and carry the price by Below this critical level, we could see a move towards 19.80 in no time.

On the other side of the coin, if the USD / MXN unexpectedly turns higher, the first technical resistance to consider will appear at 20.45 / 20.50. An increase above this barrier would be Put the June High at 20.75 in focus.



– Written by Diego Colman, Market Strategist at DailyFX

Read also Cable struggles to return unchanged later in the day.

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