Mexican Peso extends uptrend to almost nine-year lows against USD

Source Fxstreet
Apr 9, 2024 09:21
  • The Mexican Peso continues rising to almost nine-year highs against the US Dollar (USD). 
  • Mexican inflation data for March is scheduled for release on Tuesday and could cause volatility for the Peso. 
  • A higher-than-expected reading would indicate interest rates remaining elevated, increasing demand for MXN. 

The Mexican Peso (MXN) is trading at eight almost nine-year highs below 16.30 against the US Dollar (USD) on Tuesday, as it continues its long-term bull trend.

The next major release for the pair is Mexican inflation data for March, which will be released at 12.00 GMT and is likely to influence the outlook for interest rates in the country, a key driver of foreign exchange valuations.   

Mexican Peso rallies ahead of CPI data 

The Mexican Peso will probably be impacted if the Mexican inflation rate deviates significantly from analyst’s expectations. 

Mexican Headline Inflation is expected to rise by 0.36% MoM in March after registering a 0.09% rise in February. 

Core Inflation is forecast to rise 0.51% after a 0.49% increase in February. 

The Mexican Peso is likely to appreciate if inflation is hotter-than-expected since this will mean the Banco de Mexico (Banxico) will have to keep interest rates higher for longer. Higher interest rates tend to increase demand for a currency as they attract higher foreign capital inflows. 

The bank reduced interest rates from 11.25% to 11.00% at its March meeting after seeing a gradual decline in inflation, however, the meeting minutes made it clear that future decisions will be data-dependent, and that the overall outlook for inflation remains elevated. 

Technical Analysis: USD/MXN quickens downtrend

USD/MXN has quickened the pace of its long-term downtrend. The trend started after the pair peaked at 25.76 in April 2020 –  it has now fallen to the 16.20s. Since “the trend is your friend,” it is likely to extend. 

The pair is probably unfolding a large three-wave Measured Move pattern. These are composed of an A, B, and C wave, with wave C extending to a similar length to wave A, or a Fibonacci 0.618 ratio of A. 

USD/MXN Weekly Chart 

If this is the case, price has almost reached the point at which C will equal A, calculated as lying at 15.89. 

It has also by now surpassed the conservative target for the end of C at the 0.618 Fibonacci extension of A (at 18.24). 

Once the pattern is complete the market usually reverses or undergoes a substantial correction. 

The Relative Strength Index (RSI) is converging acutely with price – a sign the downtrend could be losing momentum. USD/MXN has pushed lower than the 2023 lows but RSI has not followed suit. This non-correlation is a bullish indication. It could lead to a correction higher eventually. 

There has been no reaction from price yet, however, so the expectation of upside remains speculatory and unconfirmed.

Economic Indicator

Core Inflation

The core inflation index released by the Bank of Mexico is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services, excluding taxes and energy. The purchase power of Mexican Peso is dragged down by inflation. The inflation index is a key indicator since it is used by the central bank to set interest rates. Generally speaking, a high reading is seen as positive (or bullish) for the Mexican Peso, while a low reading is seen as negative (or Bearish).

Read more.

Next release: Tue Apr 09, 2024 12:00

Frequency: Monthly

Consensus: 0.51%

Previous: 0.49%

Source: National Institute of Statistics and Geography of Mexico

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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FX option expiries for Apr 25 NY cutFX option expiries for Apr 25 NY cut at 10:00 Eastern Time, via DTCC, can be found below - EUR/USD: EUR amounts 1.0595 390m 1.0640 1.2b 1.0650 990m 1.0700 750m 1.0750 767m 1.0760 642m 1.0800 689m 1.0850 839m - GBP/USD: GBP amounts 1.2410 400m 1.2500 432m - USD/JPY: USD amounts 153.00 1.7b 154.00 1.2b 155.00 1.9b 155.25 441m 155.85 1.2b - AUD/USD: AUD amounts 0.6430 559m 0.6635 505m - USD/CAD: USD amounts 1.3650 379m 1.3750 457m .
Source  Fxstreet
FX option expiries for Apr 25 NY cut at 10:00 Eastern Time, via DTCC, can be found below - EUR/USD: EUR amounts 1.0595 390m 1.0640 1.2b 1.0650 990m 1.0700 750m 1.0750 767m 1.0760 642m 1.0800 689m 1.0850 839m - GBP/USD: GBP amounts 1.2410 400m 1.2500 432m - USD/JPY: USD amounts 153.00 1.7b 154.00 1.2b 155.00 1.9b 155.25 441m 155.85 1.2b - AUD/USD: AUD amounts 0.6430 559m 0.6635 505m - USD/CAD: USD amounts 1.3650 379m 1.3750 457m .
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FX option expiries for Apr 19 NY cutFX option expiries for Apr 19 NY cut at 10:00 Eastern Time, via DTCC, can be found below - EUR/USD: EUR amounts 1.0500 575m 1.0570 618m 1.0600 650m 1.0640 1b 1.0645 905m 1.0675 625m - USD/JPY: USD amounts 155.00 2b - AUD/USD: AUD amounts 0.6400 467m 0.6415 900m 0.6420 472m - USD/CAD: USD amounts 1.3700 1.8b 1.3775 789m 1.3820 514m .
Source  Fxstreet
FX option expiries for Apr 19 NY cut at 10:00 Eastern Time, via DTCC, can be found below - EUR/USD: EUR amounts 1.0500 575m 1.0570 618m 1.0600 650m 1.0640 1b 1.0645 905m 1.0675 625m - USD/JPY: USD amounts 155.00 2b - AUD/USD: AUD amounts 0.6400 467m 0.6415 900m 0.6420 472m - USD/CAD: USD amounts 1.3700 1.8b 1.3775 789m 1.3820 514m .
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FX option expiries for Mar 27 NY cutFX option expiries for Mar 27 NY cut at 10:00 Eastern Time, via DTCC, can be found below - EUR/USD: EUR amounts 1.0760 713m 1.0800 1.9b 1.0840 1.5b 1.0850 700m 1.0880 4.7b - GBP/USD: GBP amounts 1.26001.1b - USD/JPY: USD amounts 150.00 529m 151.50 1.2b 152.00 665m - AUD/USD: AUD amounts 0.6500 2.3b - USD/CAD: USD amounts 1.3650 1.3b - NZD/USD: NZD amounts 0.6000 959m 0.6085 500m .
Source  Fxstreet
FX option expiries for Mar 27 NY cut at 10:00 Eastern Time, via DTCC, can be found below - EUR/USD: EUR amounts 1.0760 713m 1.0800 1.9b 1.0840 1.5b 1.0850 700m 1.0880 4.7b - GBP/USD: GBP amounts 1.26001.1b - USD/JPY: USD amounts 150.00 529m 151.50 1.2b 152.00 665m - AUD/USD: AUD amounts 0.6500 2.3b - USD/CAD: USD amounts 1.3650 1.3b - NZD/USD: NZD amounts 0.6000 959m 0.6085 500m .
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