The Dollar rises to three-day highs against the Mexican Peso awaiting the Fed and Banxico

• USD/MXN rises to three-day highs at 16.79.
• The dollar appreciates on rumors of a reduction in the Fed rate cuts planned until the end of the year and the increase in US Treasury bond yields.
• Festive day in Mexico, investors await the Fed's decision on Wednesday and Banxico's on Thursday.

The USD/MXN has opened the Fed and Banxico week with an upward movement of the US Dollar that has taken it to three-day highs against the Mexican Peso at 16.79 during the American session. In the European morning, the pair had tested a daily low at 16.68.

Dollar awaits Fed projections as it rises with US bond yields

The United States Federal Reserve will announce its monetary policy decision next Wednesday, March 20, which could generate volatility in the Dollar pairs. Although no moves in interest rates are expected, the Fed's dot chart is expected to give clues to the number of rate cuts expected through the end of the year. Rumors about a reduction in the number of rate cuts until the end of the year are giving strength to the Dollar.

CME Group's FedWatch tool rules out rate cuts at the March meeting (only a 1% chance) and May (5.2% chance). For June, the probabilities of a 25 basis point cut in interest rates stand at 55.7%.

He Dollar Index (DXY) has gained momentum after the Wall Street open, rising to 103.53, its highest level since March 6. The greenback has also been strengthened by the rally in US 10-year Treasury yields, which just rose to 4.33%, their highest since February 22.

Banxico will announce its interest rates on Thursday

Mexican markets are closed today, Monday, for the holiday that celebrates the anniversary of Benito Juárez. Tomorrow, Tuesday, the country will publish its private spending for the fourth quarter of 2023, and on Thursday the retail sales for January. The key event will take place the same Thursday at 19:00 GMT, when Banxico announces its decision on interest rates. The market expects a cut of 25 basis points to 11% from the current 11.25%. If the Mexican central bank begins its rate reduction cycle before the Fed, the Dollar could appreciate against the Mexican Peso, at least in the short term.

USD/MXN: Price levels

With the Dollar trading at 16.79 Mexican pesos at the time of writing, gaining 0.48% daily, an extension of the rise will find initial resistance at 16.85, last week's high. If we surpass this level, the bulls will seek to beat the resistance zone located in the psychological region of 17.00.

In case of a setback, the USD/MXN finds support at 16.64, the 2024 floor reached on March 14. At just a few pips I would expect 16.62, the minimum of July 2023 and the lowest level recorded since 2015.