- Wall Street turns positive on Friday, helping the MXN.
- The US employment report shows better than expected figures.
- USD/MXN corrects lower, trend remains bullish.
The USD/MXN down slightly on Friday, but still bullish on the week. It bottomed out at 20.36, a three-day low, before bouncing back to the 20.45 area. The outlook remains bullish for the pair.
Fed and Banxico: rate hikes will continue
On Friday, the dollar lost momentum after the start of the American session amid an improvement in market sentiment, following the US employment report. “Another solid gain in payrolls should crush discussions that the economy is already is in a recession Employers added 372,000 jobs in June, and the unemployment rate held at 3.6% Wage growth slowed a bit, advancing 0.3%, but as hiring remains strong , we believe the June jobs report strengthens the case for another 75 basis point rate hike at the FOMC meeting on July 27,” Wells Fargo analysts explained.
Equity markets are poised to post weekly gains, but caution remains in the face of a worsening economic outlook and rising interest rates. The current environment makes it difficult for the Mexican peso to maintain a rebound. The Bank of Mexico is expected to raise the key interest rate again by 75 basis points, which will offer some support to the peso, although the reasons for the aggressive increase are negative. Inflation reached 7.99% in June, the highest level since 2001.
The MXN remains one of the few currencies that continues to rise against the dollar in the year.
Still bullish but capped below 20.70
USD/MXN is about to post another weekly rally. It is hovering around 20.45, far from the weekly maximum. A recovery above 20.45 would keep the door open for another test of 20.70. A daily close above 20.75 could signal a test of 20.90, the last defense of 21.00.
On the other hand, a consolidation below 20.40 would strengthen the Mexican peso, paving the way for the 20-day Simple Moving Average, currently at 20.25; below awaits the 200-day SMA at 20.18.
Technical levels
Source: Fx Street
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