USD/MXN bounces away from yearly lows, despite US Dollar weakness

• The USD/MXN registers minimal gains of 0.15%, trading around 17.1320, amid a weakened Dollar.
• The surprising expansion in US retail sales was offset by skepticism about the Fed’s rate hike forecasts.
• Upcoming US and Mexican data is being watched by USD/MXN traders amid mixed signals on monetary policy.

He USD/MXN it found bids around the lows so far this year and hit fresh two-day highs before reversing on the weakening US dollar. However, the USD/MXN continues to register minimal gains of 0.15%, trading around 17.1320, after hitting a low around 17.0783.

Surprising US retail sales expansion joins skepticism about Fed rate hike expectations

The Mexican Peso (MXN) weakened amid a boost in risk appetite, as evidenced by the fact that Wall Street traded with a gain. Market participants were surprised by the US Federal Reserve’s (Fed) dot charts, with 12 of 18 officials raising their dots past the 5.50% threshold and revising cap rates higher. Federal funds. Although briefly prolonging the dollar’s rally, Jerome Powell’s press conference steadied things sending the dollar lower.

In terms of data, the US economic calendar revealed a surprising expansion in retail sales, beating expectations, with an increase of 0.3% m/m in May, above estimates for a contraction of 0.1%. At the same time, the US Department of Labor updated jobless claims data for the week of June 10, growing above estimates of 249,000, at 262,000, the same as the upwardly revised numbers for the week. former.

Turning to recently released data, industrial production contracted 0.2%m/m in May, below forecasts for 0.1% growth, while the New York Fed and Philadelphia manufacturing indices returned mixed results: New York unexpectedly rebounded from the May slump, while Philadelphia’s continued to deteriorate, but at a slower pace.

In reaction to the data, US Treasury yields fell, a headwind for the dollar. The Dollar Index (DXY), which tracks the price of the greenback against a basket of six currencies, fell 0.77% to 102,209, after hitting its lowest in a month.

As for upcoming monetary policy meetings, CME’s FedWatch tool shows that the odds of a 25 basis point rate hike in July stand at 67%. In particular, traders are contradicting Fed Chairman Powell’s words about two more rate hikes, as the swap market does not expect more hikes. Investors speculate that the Fed will cut rates as early as January 2024, and expect six rate cuts through December 2024, with the FFR at 3.50%-3.75%.

upcoming events

In the United States, data from the Fed, consumer sentiment from the University of Michigan (UoM) and US inflation expectations will be released. In Mexico, retail sales and the monetary policy decision of the Bank of Mexico (Banxico) will be published next week.

USD/MXN Price Analysis: Technical Perspective

Despite paring some of its losses, USD/MXN remains on the downside as it remains below the May 16 low of 17.4038, which turned resistance, and is seen as a turning pivot that could change USD/MXN bias to neutral. This would bring into play the 17.40-17.7720 zone, surrounded by the 20 and 50 day EMAs at 17.4443 and 17.7238 respectively. Once these levels are broken, buyers of USD/MXN could remain hopeful that the pair will challenge the psychological 18.00 level in the medium term. Otherwise, the path of least resistance is to the downside, with the 17.0000 figure below, followed by 16.50, before dipping towards the October 2015 low of 16.3257.