USD/MXN looks stable around 18.80, an adverse context for the Mexican peso

• Equity markets fall, putting pressure on currencies such as the Mexican peso.
• USD/MXN had three consecutive daily falls.
• Consolidation below 18.80 would be positive for the MXN outlook.

USD/MXN is trading flat on Wednesday, trading just below 18.80, maintaining a bearish bias. On Tuesday, the Mexican peso completed three straight days with increases against the dollar.

USD/MXN slowly continues to erase last week’s strong two-day rally when it went from minimums in years to maximums in weeks in a few hours. After reaching 19.11, the pair began a retracement.

The 18.80 area is the support for the current setback and a confirmation clearly below that would once again give strength to the Mexican peso. While, if it continues above, the dollar could recover.

The context on Wednesday does not look favorable for the Mexican peso, as the equity and commodity markets are falling.

On Tuesday the data of the Mexico’s mid-January inflationwhich reported annual inflation of 7.94%, the highest for a first half of January since 2001. The figure represented an advance from the reading of 7.86% at the end of December.

The data was surely not welcomed by the Bank of Mexico. A new interest rate rise is expected by Banxico for the February 9 meeting, which would be 25 basis points from 10.50% to 10.75%. Another negative piece of data arrived on Wednesday with the Economic Activity Indicator for November falling 0.50%, while a drop of 0.10% was expected.

In the US, the next strong data will be released on Thursday with the fourth quarter GDP growth estimate, which is expected to show a 2.6% pace of expansion. In addition, attention will be focused on the price indicators of the report.

technical levels