USD/MXN remains close to the multi-month low of 17.95, focused on Mexican inflation, Powell and the NFP

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  • USD/MXN licks its wounds near the lowest levels since April 2018.
  • The Mexican peso posted the biggest weekly gains in seven months amid broad declines in the US dollar.
  • Fed Chairman Jerome Powell needs to defend the hawkish bias to prevent a further USD slide.

He USD/MXN registers slight gains around 17.98 at the start of the European session on Monday, paring some of the biggest weekly loss in seven months from the previous week. In this way, the pair follows in consolidation mode before the first level data events.

Even so, the inability of the dollar to recover the bullish momentummainly due to declining Treasury yields, joins the New concerns suggesting a monetary policy divergence between the US Federal Reserve (Fed) and Banxico to test USD/MXN buyers.

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The recent mix of concerns about China and weak oil prices could be related to the latest bounce in the USD/MXN pair. That said, the National Development and Reform Commission of the People’s Republic of China (NDRC) recently said that it will “further unleash the potential for consumption,” while adding that China’s economy is steadily improving, according to Reuters. Earlier in the day, market sentiment soured after the annual session of China’s National People’s Congress looked a grim event given its growth target and geopolitical concerns.

Besides, Fed policymakers’ indecision and mixed US data contrast with Banxico’s hawkish bias to keep the USD/MXN bears hopeful. Over the weekend, Federal Reserve Bank of San Francisco President Mary Daly highlighted the importance of incoming data in determining how far rates can rise. Earlier, Atlanta Fed President Raphael Bostic renewed the Concerns about the Fed’s policy pivot, while the Federal Reserve released a semi-annual Monetary Policy report on Friday stating clearly: “Continued increases in the Fed funds rate target are necessary.” The report also reported that the Fed is firmly committed to getting inflation back to 2%.

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Regarding the data, Weaker US Consumer Confidence, ISM PMI and Durable Goods Orders Look to Challenge Dollar Bulls. On the other hand, the bullish January trade balance and seasonally adjusted unemployment rate results in Mexico seem to have favored the USD/MXN bears.

Against this backdrop, 10-year US Treasury yields rose to the highest levels since November 2022 in the past week before easing to 3.95% late on Friday. More importantly, coupons on two-year US bonds rose to the highest levels last seen in 2008 before easing back to 4.85% at time of writing. That said, S&P 500 futures are marking slight gains, following Wall Street’s moves amid a soft start to a key week.

Looking ahead, it is likely that testimony from the Fed Chairman, Jerome Powell, China Inflation Data and Friday’s US Jobs Report for February are the key catalysts to pay attention to for clear directions. Besides, Mexico’s inflation data for February, to be released on ThursdayThey will be crucial.

USD/MXN Technical Analysis

Although the April 2018 low near 17.93 supports immediate drop in USD/MXN, recovery moves for pair remain unimpressive below previous late-November 2022 support line near 18.15.

USD/MXN additional technical levels

Last price today 17.9759
daily change today 0.0195
today’s daily variation 0.11%
today’s daily opening 17.9564
daily SMA20 18.4929
daily SMA50 18.8121
daily SMA100 19.2148
daily SMA200 19.6815
previous daily high 18.1344
previous daily low 17.9541
Previous Weekly High 18.4235
previous weekly low 17.9541
Previous Monthly High 19.2901
Previous monthly minimum 18.2954
Fibonacci daily 38.2 18,023
Fibonacci 61.8% daily 18.0655
Daily Pivot Point S1 17.8955
Daily Pivot Point S2 17.8347
Daily Pivot Point S3 17.7152
Daily Pivot Point R1 18.0758
Daily Pivot Point R2 18.1953
Daily Pivot Point R3 18.2561

Source: Fx Street

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