- USD/MXN drops to two-week lows at 18.63.
- US Dollar Rebounds Higher on Data but Loses Ground Against Mexican Peso
- US retail sales rebound more than expected in July, while industrial production falls more than expected.
The USD/MXN is down for the third consecutive day on Thursday. The pair started the day around a daily high of 18.84 before falling to a two-week low of 18.63. At the time of writing, the US Dollar is trading against the Mexican Peso above 18.66, losing 0.72% on the day.
The US dollar responds to the rise after the US data, although it falls against the Mexican peso
The US Dollar Index (DXY) has reacted to the upside following a rebound in US retail sales, rising to a two-day high of 103.27. The rally has subsequently lost momentum, losing ground to the 102.85 area.
U.S. retail sales rose 1% to $709.7 billion in July, the U.S. Census Bureau reported Thursday. The reading followed a 0.2% decline (revised from 0%) in June and beat the market expectation of a 0.3% increase.
On the other hand, there were 227,000 initial claims for jobless benefits in the week ending August 10, weekly data released by the US Department of Labor (DOL) showed on Thursday. This figure followed the previous week’s reading of 234,000 (revised from 233,000) and was better than the market expectation of 235,000.
Finally, today the data was also published in the USA. Industrial production, which fell 0.6% monthly in Julycompared to an estimated decline of 0.3%.
For its part, Mexico has published its manufacturing sector indicator. In June 2024, in the manufacturing sector, total employed personnel and hours worked decreased by 0.1% while average real wages paid (wages, salaries and social benefits) fell by 0.4% at a monthly rate.
USD/MXN Price Levels
With the USD/MXN immersed in a bearish channel on the hourly chart, the first level of support awaits at the August low, recorded on the 1st, at 18.42. Below that, the bearish target will be in the 18.00 area.
On the upside, the first resistance awaits at the hourly moving average at 18.90. Further up, the next resistance is at 19.09, the high of August 13.
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. As of 2022, it is the most traded currency in the world, accounting for over 88% of all global foreign exchange transactions, equivalent to an average of $6.6 trillion in daily transactions. Following World War II, the USD took over from the British Pound 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: to achieve price stability (control inflation) and to promote full employment. Its main tool for achieving these two goals is to adjust interest rates. When prices rise too quickly and inflation exceeds the Fed’s 2% target, the Fed raises rates, which helps 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 in a jammed financial system. It is an unconventional policy measure used when credit has dried up because banks are not lending to each other (for fear of counterparty default). It is a last resort when simply lowering 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 typically leads to a weakening of the US dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal of maturing securities in new purchases. It is generally 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.
