The Dollar recovers ground against the Mexican Peso but remains below 16.50

• USD/MXN fell to intraday lows of 16.37 before the Wall Street open, later rising to 16.48.
• The price of the Dollar recovers ground after the mixed US PPI data and the increasing possibility of a first Fed rate cut in September.
• Mexico's industrial production rises 3.3% annually in February, below the expected 3.5%.

The USD/MXN traded during the first part of Thursday around 16.45, but after the publication of US producer inflation data it fell to 16.37, the day's low. In the last few hours, the pair has risen to a daily ceiling at 16.48 strengthened by several factors.

The Dollar strengthens again due to the possible delay in the start of the Fed's rate cuts

The Dollar Index (DXY) rises strongly for the second consecutive day, driven yesterday by higher-than-expected US inflation data and today by the reduction of the options for an interest rate cut by the Fed in June and July.

The DXY has reached the 105.52 zone today, its highest level in five months. The maximum was achieved after the US producer price data (IPP), which showed an annual increase of 2.1% in the general index in March, above the previous 1.6% but below the expected 2.2%. The Production Price Index (IPP) excluding food and energy has risen 2.4% year-on-year, above the previous 2.1% and worsening the forecasts of 2.3%.

Another key factor for the strengthening of the Dollar has been the market's valuation of the first Fed cut. According to the CME Group's FedWatch tool, the chances of a first cut in June have decreased today to 20.4%. In July, options rise to 41% while in September they rise to 45.3%.

For its part, Mexico has published its industrial production figures for February, showing an increase of 3.3% annually compared to 2.7% in January, without reaching the forecasts of 3.5%. On a monthly basis, the indicator has fallen 0.1% after rising 0.2% the previous month, disappointing expectations for a 0.3% rise.

USD/MXN Price Levels

USD/MXN remains limited below 16.50, trading at 16.45 at the time of writing, gaining 0.08% so far on Thursday. In case the Dollar continues to advance, the first resistance appears at 16.49/50, weekly top of April 8 and psychological level, respectively. A breach of this zone could take us towards 16.67, the April maximum reached last week. Higher up, the 16.77 region awaits, the ceiling of the last week of March.

On the downside, a break of the almost nine-year low of 16.26 recorded on April 9 would point to 16.10/15, where the lows of August 2015 are. Below it awaits the strong psychological region of 16.00 before falling to 15.63, bottom July 2015.