- The ADP private employment report beat estimates but failed to boost the dollar against the MXN.
- US Federal Reserve Chairman Jerome Powell is set to testify in the US House of Representatives, with his expected follow-up to the duara-line comments.
- USD/MXN Price Analysis: A break below 18.00 warrants further downside, with bears targeting 17.449.
He USD/MXN it fell below the psychological barrier of $18.00 on Wednesday despite hawkish comments from US Federal Reserve (Fed) Chairman Jerome Powell. On Tuesday, the Mexican peso (MXN) depreciated towards the weekly high of 18.18, but today it is staging a surprising recovery, sinking the pair to 5-year lows at 17.92. At the time of writing these lines, the USD/MXN is trading above 17.96, losing 0.83% daily.
US ADP jobs data beat estimates prior to the US NFP report.
Wall Street opened green. The US ADP National Employment Report for February showed private hiring increased by 242,000 jobs, above estimates of 200,000 jobs. This reinforces Fed Chairman Jerome Powell’s stance that the labor market is tight and there is more work to be done.
On Tuesday, Fed Chairman Jerome Powell testified before the US Senate Finance Committee. He recognized that the rate ceiling would be higher and opened the door for significant rate hikes. Powell added that it would be decided based on the incoming data. Before the Fed’s March meeting, the United States will report the Non-Farm Payrolls for February and inflation data on the 14th.
Meanwhile, the Dollar Index (DXY), which measures the value of the dollar against six currencies, fell 0.11% to 105.502, influenced by falling US bond yields. 10-year bonds stand at 3,913%, with a drop of five basis points.
Meanwhile, inflation in Mexico is expected to slow in February, according to a Reuters poll. Seventeen analysts consulted by Reuters forecast inflation of 7.69% in February, down from 7.91% in January.
The members of the central bank Banco de México (Banxico) expressed that rates could rise moderately from the next meeting of monetary policy, according to the minutes of the last meeting. Although there is a dissident, the majority of the board agreed that the adjustment cycle is about to end.
This could favor a recovery of the US dollar (USD) in the medium and long term. Therefore, the bias of the USD/MXN could change to the upside depending on the reduction of the interest rate differentials between the Fed and Banxico.
USD/MXN Technical Analysis
USD/MXN remains biased to the downside after plunging below the 18.00 barrier. Oscillators like the Relative Strength Index (RSI) accelerate lower. Meanwhile, the Rate of Change (RoC) returns below neutral, suggesting that sellers are gathering momentum. That being said, the USD/MXN’s first support would be the July 2017 lows at 17.44. A breakout of this region would expose the April 2016 lows in 17.0509in front of $17.00.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
