- USD/MXN falls to daily lows at 20.26.
- The US dollar ends the week losing 1.42%.
- The focus next week will be on employment data from Mexico and the United States.
The USD/MXN registers its third consecutive day of losses this Friday. The pair started the day testing a daily high at 20.47, before sliding to a daily low of 20.26. At the time of writing, the US Dollar is trading against the Mexican Peso above 20.27, losing 0.77% on the day.
US Dollar weakens during Black Friday
The US Dollar Index (DXY) falls today to 105.62, a new 17-day low, approaching a weekly close with a loss of 1.42%. The greenback has fallen amid the resurgence of risk aversion due to the intensification of geopolitical conflicts between Russia and Ukraine, and between Israel and Hezbollah.
On the other hand, Donald Trump began the week by threatening to increase tariffs on Canada and Mexico. Days later he lowered the tone of his comments, favoring a recovery of the Mexican peso against the dollar.
The lack of volume in the last two days of the week due to the American holiday of Thanksgiving and the extended holidays to Black Friday have not favored the US dollar either.
The focus turns to employment data from the US and Mexico
USD/MXN traders will be closely monitoring employment data from Mexico and the United States next week. The Mexican unemployment data for the month of October will be published on Tuesday at 12:00 GMT. In September, unemployment stood at 2.9% compared to the expected 3%. On Friday it will be the turn of the US Non-Farm Payrolls (NFP) for November, estimating the creation of 183,000 jobs after only generating 12,000 in October. Ahead of the NFP, the US will release the ADP private employment figure on Wednesday and weekly jobless claims for the week of November 29 on Thursday.
USD/MXN Price Levels
On the downside, a break of yesterday’s low at 20.20 could trigger a decline towards the November low at 19.76. Further down, 19.11, the October bottom, will act as a retaining wall before the decline extends to the round level of 19.00.
To the upside, the main resistance appears at 20.83, the 2024 top. Above, there is a difficult barrier to overcome around 21.00/21.05, the psychological level and July 2022 high.
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.
