The Dollar tries to rebound against the Mexican Peso after falling to new five-week lows

• USD/MXN tries to bounce slightly higher after falling to new five-week lows at 16.57.
• The dollar recovers ground in a context of risk aversion due to geopolitical tensions.
• Mexico's retail sales decline in March, focus turns to Fed members' speeches.

USD/MXN has started the week falling to new five-week lows at 16.57 at European midday, but has subsequently gained momentum, rising after the Wall Street open to a daily high at 16.64. At the time of writing, the pair is trading above 16.59, losing 0.08% on the day.

Risk aversion favors a rebound in the dollar

The Dollar Index (DXY) has started Monday moving around 104.50. The climate of risk aversion dominates the markets after the death in a helicopter accident of Iranian President Ebrahim Raisi and other senior officials of his executive branch. In recent hours, the DXY price has risen to a daily high of 104.65, as traders await speeches from FOMC members.

Without relevant data on the US agenda, the focus is on the speeches of the members of the Fed. Raphael Bostic, president of the Atlanta Federal Reserve, has indicated that it will take some time before inflation will drop to 2% again, and in the meantime, the entity is open to all possibilities. On the other hand, the Fed's vice president of supervision, Michael Barr, has pointed out that restrictive policy will have to be given more time to continue doing its job. Philiph N. Jefferson, member of the Board of Governors of the Federal Reserve, will speak shortly.

Following these comments, CME's FedWatch tool has lowered its chances of a first interest rate cut in September to 49.6%.

Mexico's retail sales fall in March, focus turns to inflation in the first half of the month

Mexico's retail sales fell 0.2% monthly in March after growing 0.4% in February, as published by the National Institute of Statistics and Geography (INEGI). On a year-on-year basis, the indicator has fallen 1.7% after rising 3% the previous month. This is the largest drop recorded in retail sales in three years, specifically since February 2021.

This week other important data for the Mexican economy will be published. Thursday will be the key day, with inflation for the first half of May expected to fall 0.19% from a previous 0.09% increase. That same day, Mexico will publish its Gross Domestic Product for the first quarter, estimating an increase of 1.7% compared to the previous 1.6%. Finally, on Friday the current account data for the first quarter will be released.

It should be noted that the latest rise in the Mexican peso is still determined by the statements of the deputy governor of Banxico, Irene Espinosa, who on Friday pointed out that the Mexican central bank must maintain interest rates at current levels, since the battle against inflation has not ended.

USD/MXN Price Levels

The trend is immersed in a bearish channel on the hourly chart, pointing to today's low at 16.57 as the first support. If the pair breaks the round level of 16.50, it will have a clear path towards the 2024 minimum recorded at 16.26 on April 9.

To the upside, the first resistance appears at the 100 moving average at 16.71. Above, the main barrier is in the psychological zone of 17.00.

USD/MXN One Hour Chart