USD/MXN Price Forecast: Finds resistance around 19.20 ahead of nine-day EMA
- USD/MXN may find support around the eight-month low at 19.16.
- The RSI remains below the 50 level, strengthening the bearish bias.
- The pair may target the primary barrier at the nine-day EMA of 19.27.
USD/MXN inches higher after registering losses in the previous session, trading around 19.20 during the Asian hours on Thursday. The daily chart’s technical analysis suggests a prevailing bearish bias, with the pair consolidating within a descending channel pattern.
The USD/MXN remains below the nine-day Exponential Moving Average (EMA), indicating weaker short-term momentum. Additionally, the 14-day Relative Strength Index (RSI) is positioned below the 50 level, indicating a strengthening bearish bias.
On the downside, the USD/MXN could target the eight-month low of 19.16, which was recorded on June 4. A break below this level could prompt the pair to navigate the region around the lower boundary of the descending channel pattern at 18.55.
The nine-day EMA at 19.27 appears as the initial barrier, followed by the descending channel’s upper boundary around 19.40. A break above this crucial resistance zone would cause the emergence of the bullish bias and support the USD/MXN pair to test the 50-day EMA at 19.62.
A break above the 50-day EMA would improve the medium-term price momentum and prompt the USD/MXN pair to target the seven-week high at 19.78, which was marked on May 6.
USD/MXN: Daily Chart
Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
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