- The USD/MXN decline is approaching the 20.00 zone.
- US Dollar falls to 10-day lows after mixed US data
- The focus now turns to unemployment data from Mexico and the United States that will be published on Friday.
USD/MXN began the day on Thursday testing a daily high of 20.18, although it later retreated to a daily low of 20.02. At the time of writing, the pair is trading above 20.05, falling 0.51% on the day.
US Dollar weakens after mixed US data
The Dollar Index (DXY) has fallen to its lowest level in ten days at 103.82 after the US released better-than-expected jobless claims data and inflation of PCE persistent.
Core inflation of personal consumption expenditure (PCE) remained at 2.7% annually in October, one tenth above the expected 2.6%. For their part, the Jobless claims for the week of October 25 moderated to 216,000 from the previous 228,000, improving the 230,000 expected by the market.
On the other hand, the polls for the electoral race in the White House continue to adjust, with a 48% probability of voting for the candidate, according to the New York Times poll.
Focus on employment data from Mexico and the US.
USD/MXN traders will now focus on employment data from Mexico and the United States. The Mexican data for the month of September will be published first, it is expected that there will be no changes and it will remain at 3%. Non-Agricultural Payrolls, however, could offer surprises. 113,000 new jobs are forecast in October compared to 254,000 the previous month, but this forecast is thought to be well below the actual figure to be released tomorrow.
USD/MXN Price Levels
Although the general trend is bullish, we could see a downward break of the support located in the 20.00 area. This breakout could take USD/MXN to 19.75, last week’s low.
If the USD/MXN exceeds yesterday’s and the last 25-month ceiling of 20.22, the next target will be 20.57, September 2022 high. Higher awaits the region of 20.99/21.00, July 2022 ceiling and psychological zone .
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.
