USD/MXN bounces after hitting weekly lows near 18.70; Mexican peso outperforms its emerging peers

• The Mexican peso, among the most bullish on Friday.
• The UUSD/MXN fall found support above 18.70 as the DXY strengthens after the start of the American session.
• US data mostly in line with expectations on Friday.

The USD/MXN it fell to 18.71 on Friday, hitting its lowest level since January 18 and then rebounded, erasing daily losses after the dollar gained momentum after the Wall Street opening bell.

The dollar remains weak against emerging market currencies as equity and commodity markets rise. The Mexican peso is outperforming its emerging market counterparts on Friday, although it has fallen back over the past hour. US yields rose during the American session supporting the dollar.

Market participants are now focused on the FOMC meeting next week. The Federal Reserve is expected to raise rates by 25 basis points. Data released on Thursday and Friday showed a slowdown in the US economy and also in inflation indicators. At the same time, the labor market continues to enjoy good health. Non-farm payrolls will be reported next Friday.

In Mexico, the unemployment rate fell to a new record low, but this was mainly due to a decline in the activity rate. In fact, employment fell by more than 900,000 positions, the worst month in years.

On Thursday the Board of Directors of Banco de México meets. A 25 basis point rate hike is expected as inflation remains well above the central bank’s target of 3%, plus or minus one percentage point. The semester inflation of January showed an increase of 0.46%, with an annual rate of 7.94%. Worrying was the annual rise in the core CPI from 8.35% to 8.45%.

USD/MXN Outlook

The USD/MXN has once again surpassed the 18.75 zone, which is a relevant support zone. A consolidation below would open the doors to more losses. Conversely, if the pair moves above 18.90, the US dollar would strengthen.

The daily chart shows the USD/MXN consolidating near 18.80. The main trend is down, but if the peso fails to post new highs any time soon, a US dollar recovery seems likely.

technical levels