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The Dollar falls against the Mexican Peso to the 17.20 zone after reaching five-month highs near 18.00 due to tensions in the Middle East

  • USD/MXN rose to five-month highs of 17.92 after news of Israel's counteroffensive against Iran early Friday morning.
  • The price of the Dollar soared as a safe haven value, although the calmer market mood has led it to moderate before Friday's close.
  • Mexico's retail sales grew 3% annually in February, their biggest rise in four months.

The USD/MXN registered a spectacular rise at the beginning of Friday, when several international news agencies reported that Israel had attacked the surroundings of the Iranian city of Isfahan with drones. The Dollar shot up against the Mexican Peso to 17.92, its highest level in five months, although it subsequently lost momentum until returning before the opening of Wall Street to the 17.20 area, still far from the price level at the opening of the day around 17.07.

The Dollar moderates after the shock due to the Israeli attack on Iran

The Dollar Index (DXY) gained strength with the news from the Middle East, reaching 106.34 points, a two-day high, in the Asian session. The strong risk aversion caused by the Israeli drone attack on Iran boosted safe haven assets, thus hurting risk-related ones. In recent hours, the markets have calmed down, since the latest information suggests that Israel will probably not attack Iran again, this being only a show of force in response to the Iranian attack last weekend. The relative calm that is felt at this time in the main stock markets has caused a decline in the Dollar, taking the DXY to a daily minimum of 105.90.

Regarding the markets' assessment of the Fed's first interest rate cut, CME Group's FedWatch tool rules out the possibility of it occurring in the June or July meetings, presenting today 16.4% and 37.1% options , respectively. For September, the probabilities rise to 45.2%, not far from those of the November meeting, which are already at 42.7%.

Mexico's retail sales record their biggest rise since October

Mexico's retail sales grew 3% in the annual reading for February after two previous consecutive months of declines, as published by the National Institute of Statistics and Geography (INEGI). This is the largest increase recorded by the indicator in four months. On a monthly basis, retail sales increased 0.4% in February after falling 0.6% in January, this being the largest increase seen since October.

Next week the focus will be on inflation for the first half of April in Mexico, which will be published on Wednesday, and on the unemployment rate for March, which will be released on Friday.

USD/MXN Price Levels

With the USD/MXN trading at the time of writing above 17.20, gaining 0.77% daily, the bullish trend has been imposed on short and medium-term charts. In any case, on long-term charts such as the weekly one, the bearish bias remains clear.

The price of the Dollar against the Mexican Peso has broken the main resistance located at the 2024 maximum at 17.38. In case of seeing a renewal of the bullish momentum of the USD/MXN, the resistance will now be in the psychological zone of 18.00, followed by around 18.49/18.50, where the maximum of the last twelve months recorded in October 2023 is.

On the downside, the 17.00 region now acts as support. A break below could point towards 16.54/16.55, where this week's low is reached on Monday, April 15.

Source: Fx Street

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