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The Dollar falls to two-day lows against the Mexican Peso after the US CPI.

  • USD/MXN has fallen to two-day lows at 16.75.
  • The Dollar falls after the US inflation data.
  • The US CPI grew 0.3% monthly in April, below the expected 0.4%.

USD/MXN has traded around 16.85 during the first part of Wednesday. Following the US inflation data, the pair initially reacted higher, rising to a six-day high at 16.90, but immediately afterwards fell to a two-day low at 16.75.

The dollar retreats amid weaker-than-expected US monthly inflation

The United States Consumer Price Index (CPI) grew 0.3% in the monthly reading for April after increasing 0.4% in March, as published by the Department of Labor. The figure is below the 0.4% estimated by the market. Annual inflation stood at 3.4%, in line with expectations, one tenth below the 3.5% of the previous month.

The annual core CPI has reduced two tenths to 3.6% from the previous 3.8%, as expected. This is the lowest level recorded by the indicator in three years.

The inflation data, coupled with weak April retail sales, which stood at 0% versus the expected 0.6% increase, caused the Dollar Index (DXY) to fall from around 104.80 to a five-year low of 104.43. weeks.

The CME Group's FedWatch tool now assesses that there is a 96.9% probability that the Fed will maintain its interest rates at 5.5% at the June meeting and a 70.9% probability that it will not change them in July either. In September, however, the options for a first cut have just risen, rising to 53%.

In Mexico, the National Institute of Statistics and Geography (INEGI) has presented the results of the Timely Indicator of Private Consumption (IOCP). This allows us to have timely econometric estimates on the evolution of the Monthly Indicator of Private Consumption (IMCP). For March 2024 and at an annual rate, the IOCP anticipates an increase of 4% in the IMCP, and for April of 2.9%.

USD/MXN Price Levels

With the pair trading at the time of writing above 16.75, down 0.60% on the day, the first level of support appears at 16.72, last week's low, and subsequently around 17.50/17.55. The bottom of 2024 and the last almost nine years at 17.26 will be the strongest point of containment in case of a further decline.

To the upside, the next resistance zone appears at 16.92, 100 daily moving average on one-day chart. Above, the main resistance is in the psychological zone of 17.00 before 17.39, the ceiling of April 25.

Source: Fx Street

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