- USD/MXN falls to three-day lows at 20.28.
- US Dollar loses momentum following ADP private employment data and US ISM services data, both lower than expected.
- The focus now shifts to the speech by Jerome Powell, president of the Fed.
USD/MXN has fallen to three-day lows at 20.28 this Wednesday after disappointing ADP employment and ISM services data from the United States. The pair has previously moved in a tight range capped to the upside by 20.38. At the time of writing, the Dollar is trading against the Mexican Peso above 20.30, losing 0.16% daily.
The Dollar gives ground after the decline of the US services ISM.
The US Dollar Index (DXY) rose in the first part of the day to a two-day high of 106.72, but after the US ISM services data, which has fallen more than three points below expectations , the greenback has lost all its gains, trading flat on the day around 106.35.
The US ISM services PMI has fallen in November to 52.1 points from 56 in October, its lowest level in three months. The figure has disappointed market expectations, as a slight decline to 55.5 was expected.
Previously, the ADP jobs report had shown that the US created 146,000 private jobs in November, down from 184,000 in October and an estimated 150,000.
Focus turns to Fed speeches ahead of Non-Farm Payrolls
Alberto Musalem, president of the St. Louis Fed, has made statements in recent hours, ensuring that it could be possible to pause interest rate cuts in the next meetings. Musalem also pointed out that before deciding what will be done in December, they will wait for the publication of economic data.
In the next few hours, USD/MXN operators will be very attentive to the speech by Jerome Powell, president of the Federal Reserve, who will speak at 18:45 GMT. Mary Daly, president of the San Francisco Fed, will also speak at 23:00 GMT.
USD/MXN Price Levels
If it continues to lose ground, a break of last week’s low at 20.20 could see USD/MXN decline towards the November low at 19.76. Further down, USD/MXN will target 19.58, 100-period moving average on the daily chart before targeting 19.11, October bottom.
To the upside, initial resistance is at the 100-period moving average on one-hour chart at 20.39. Above, the main barrier appears at 20.83, the 2024 ceiling. Higher up, there is a difficult wall to overcome around 21.00/21.05, the psychological level and July 2022 maximum.
The US Dollar FAQs
The United States Dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation alongside local banknotes. According to 2022 data, it is the most traded currency in the world, with more than 88% of all global currency exchange operations, equivalent to an average of $6.6 trillion in daily transactions. After World War II, the USD took over from the pound sterling as the world’s reserve currency.
The single most important factor influencing the value of the US Dollar is monetary policy, which is determined by the Federal Reserve (Fed). The Fed has two mandates: achieve price stability (control inflation) and promote full employment. Your main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% target set by the Fed, the Fed raises rates, which favors the price of the dollar. When Inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the Dollar.
In extreme situations, the Federal Reserve can also print more dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit into a clogged financial system. This is an unconventional policy measure used when credit has dried up because banks do not lend to each other (for fear of counterparty default). It is a last resort when a simple lowering of interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis of 2008. It involves the Fed printing more dollars and using them to buy US government bonds, primarily from financial institutions. QE usually leads to a weakening of the US Dollar.
Quantitative tightening (QT) is the reverse process by which the Federal Reserve stops purchasing bonds from financial institutions and does not reinvest the principal of maturing portfolio securities in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
