- USD/MXN reverses the previous day’s gains ahead of the Fed’s monetary policy decision.
- The MACD is showing a divergence pattern below the signal line, indicating a change in momentum.
- Immediate support appears around the weekly low, followed by the psychological level of 17.00.
USD/MXN gives up the previous day’s gains and trades lower around 17.07/17.10 during European midday trading on Tuesday. Investors’ caution ahead of the US Federal Reserve’s (Fed) monetary policy decision contributes to undermining the pair.
Immediate support for the USD/MXN pair appears around the weekly low at 17.0308, followed by the psychological level of 17.0000.
If the bearish sentiment puts pressure, the pair could approach the next support level near the psychological level of 16.9000.
The USD/MXN pair could face a challenge around the seven-day EMA at 17.1625, following the 23.6% Fibonacci retracement at the 17.1904 level.
A break above the latter could open the doors for the pair to explore the area around the psychological level of 17.2000.
The Moving Average Convergence Divergence (MACD) line remains above the center line, but shows a divergence pattern below the signal line. This pattern indicates that the recent bullish trend of the USD/MXN pair is losing steam.
However, the 14-day Relative Strength Index (RSI) indicates short-term bearish momentum as it is below the 50 level.
Frequently asked questions about MXN
What is MXN?
The Mexican Peso is the legal tender of Mexico. The MXN is the most traded currency in Latin America and the third most traded on the American continent. The Mexican Peso is the first currency in the world to use the $ sign, prior to the later use of the Dollar. The Mexican Peso or MXN is divided into 100 cents.
What is Banxico and how does it influence the MXN?
Banxico is the Bank of Mexico, the country’s central bank. Created in 1925, it provides the national currency, the MXN, and its priority objective is to preserve its value over time. In addition, the Bank of Mexico manages the country’s international reserves, acts as a lender of last resort to the banks and advises the government economically and financially. Banxico uses the tools and techniques of monetary policy to meet its objective.
How does inflation impact the MXN?
When inflation is high, the value of the Mexican Peso (MXN) tends to decrease. This implies an increase in the cost of living for Mexicans that affects their ability to invest and save. At a general level, inflation affects the Mexican economy because Mexico imports a significant amount of final consumption products, such as gas, fuel, food, clothing, etc., and a large amount of production inputs. On the other hand, the higher the inflation and debt, the less attractive the country is for investors.
How does the Dollar influence the Mexican Peso (MXN)?
The exchange rate between the USD and the MXN affects imports and exports between the United States and Mexico, and may affect demand and trade flows. The price of the Dollar against the Mexican Peso is affected by factors such as monetary policy, interest rates, the consumer price index, economic growth and some geopolitical decisions.
How does the Fed’s monetary policy affect Mexico?
The Fed’s interest rate increases may affect Mexico’s government debt market, as the spread between Banxico’s rates and the US Federal Reserve narrows.
What correlation does the MXN and oil have?
Usually, when the price of oil rises, the Mexican Peso (MXN) appreciates, while a fall in the value of crude oil drags down the Mexican currency. This is due to Mexico’s consideration as an oil exporting country, being among the 15 largest global crude oil producers.
USD/MXN: Daily Chart
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.
