- The USD/MXN falls 0.48% on Friday.
- The US dollar falls marginally after five consecutive days of gains.
- Investors will be keeping an eye on Mexico’s retail sales, due to be released next Tuesday.
USD/MXN reacted lower from a three-day high at 20.26, where it attracted sellers that dragged the pair to a day’s low at 20.14. Currently, the price of the US dollar is trading at 20.13 against the Mexican Peso, falling 0.48% on the day.
US Dollar Trades Flat Ahead of Next Week’s Key Economic Data
The Dollar Index (DXY) falls 0.01% daily, after reaching more than two-week highs not seen since November 26 at 107.18, trading at the time of writing at 106.98.
Next week’s US economic agenda considers S&P Global’s preliminary services PMI, November retail sales, the Fed’s interest rate decision, Gross Domestic Product and the personal consumption expenditure price index. .
The Bank of Mexico will decide its next interest rate movement next Thursday
On the other hand, investors will be attentive to the publication of Mexican retail sales on Tuesday, December 17 and the interest rate decision by Banxico on Thursday, December 19.
USD/MXN Price Levels
USD/MXN established short-term resistance at 20.32, the December 10 high and close to the 50% Fibonacci retracement. We observe the next resistance zone at 20.89, given by the maximum of November 26. The nearest support zone is at 20.06, the pivot point of November 19.
USD/MXN 4-hour chart
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.
