USD/MXN falls below 17.0000 on mixed market sentiment and falling US yields.

  • US existing home sales down -2.2% in July, with inventory constraints and rising mortgage rates the main drivers.
  • The Richmond Fed’s manufacturing index meets expectations with a drop of -7, while the services index surprises positively at 4.
  • Richmond Fed President Barkin suggests that strong economic data is driving yield moves, hinting at possible further tightening.
  • Upcoming economic data from Mexico includes inflation for the first half of August, which is expected to show a decline.

He Mexican Peso (MXN) posted solid gains on Tuesday as the USD/MXN pair plunged below 17.0000 amid the lack of a catalyst, even as the mood has deteriorated. US Treasury yields remain almost sideways, but the dollar gains ground against most G7 currencies. He USD/MXN trades at 16.9288, losing 0.44%.

Despite Deteriorating Sentiment and Dollar Gains Against G7 Currencies, MXN Holds Firm

Wall Street turned negative as the North American session progressed. US Existing Home Sales fell less than expected, yet contracted at a -2.2% pace in July, driven by inventory availability and higher mortgage rates. At the same time, the Richmond Fed’s manufacturing index fell to -7 according to estimates, while its services index turned positive at 4, crushing estimates of a -4 plunge.

USD/MXN is also falling as US bond yields at the long end of the curve decline. The exception is the 3-month and 2-year US Treasury bonds, which trade at 5.30% and 5.02%, respectively. In recent words from Richmond Fed President Thomas Barkin, the yield move is not a sign of “inappropriate” market tightening, but rather a response to strong economic data.

Barkin added that if inflation remains high and the economy strengthens further, “that would justify” further tightening.

Meanwhile, the Dollar Index (DXY), which measures the dollar’s value against a basket of six currencies, is up 0.25% to 103.579, but has so far failed to prevail against emerging market currencies.

On the other hand, on August 24, inflation for the first half of August will be published, which is estimated to drop to 4.67% year-on-year and 0.28% monthly. Meanwhile, Mexico’s Economy Secretary Raquel Buenrostro told Reuters: “Mexico rules out modifying a decree on genetically modified (GM) corn before a dispute settlement panel requested by the United States through the USMCA trade pact.”

On the US front, the economic calendar would feature Fed speakers, S&P Global PMIs, durable goods orders, and new home sales.

USD/MXN Price Analysis: Technical Insights

Today, USD/MXN resumed its downtrend, after holding above 17.0000 for the last 14 days, after colliding with the confluence of the 20 and 50-day moving averages (DMA) at 17.0000, causing a drop towards a daily low of 16.8930. If there were to be a decisive break below that level, the pair would challenge the year-to-date low of 16.6238. However, if USD/MXN recovers to 17.00, that could pave the way for a test of the 100 DMA at 17.4011.

USD/MXN Price Action – Daily Chart

USD/MXN

Overview
Last price today 16.9317
Today Change Daily -0.0833
today’s daily variation -0.49
today’s daily opening 17,015
Trends
daily SMA20 17.0149
daily SMA50 17.0231
daily SMA100 17.42
daily SMA200 18.1789
levels
previous daily high 17.08
previous daily low 16.9983
Previous Weekly High 17.2094
previous weekly low 16.9663
Previous Monthly High 17.3957
Previous monthly minimum 16.6258
Fibonacci daily 38.2 17.0295
Fibonacci 61.8% daily 17.0488
Daily Pivot Point S1 16.9822
Daily Pivot Point S2 16.9494
Daily Pivot Point S3 16.9004
Daily Pivot Point R1 17.0639
Daily Pivot Point R2 17.1128
Daily Pivot Point R3 17.1456

Source: Fx Street

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