USD/MXN shifts during the trading session, printing a new weekly low below 18.0000

• Initial Jobless Claims hit 239K, exceeding estimates of 234K.
• US inflation on the producer side edged lower, cementing the case for a Fed pivot.
• USD/MXN Price Analysis: To extend its losses past the 18.0000 support.

The Mexican Peso (MXN) extended its weekly gains below the 18.0000 barrier, as the USD/MXN hit a new weekly low at 17.9749. But a late bounce propelled the USD/MXN back above the 18.0000 mark, trimming some of its earlier losses. At the time of writing, the USD/MXN is trading at 18.0158, down by 0.30%.

Economic data from the United States weighed on the US Dollar, boosted the Mexican Peso

On Thursday, the sentiment remained positive after the release of softer-than-estimated US jobs data, followed by inflation at the factory gate. Initial Jobless Claims for the week ending on April 8 exceeded estimates of 234K and hit 239K while Continuing Claims dipped. The March Producer Price Index (PPI) edged lower on annual and monthly readings, while the core PPI was mixed. Core PPI was -0.1% MoM, below estimates of 0%, while annually based dropped to 3.4% from 4.8%.

Even though traders’ bets are pricing in a 25 bps rate hike by the US Federal Reserve at the upcoming meeting, a pivot is widely expected. In addition, investors are pricing three 25 bps rate cuts by the year’s end, which spurred the US Dollar (USD) weakness across the board.

Consequently, the US Dollar Index (DXY) tracks the buck’s value vs. a basket of six currencies, drops 0.51%, and exchanges hands at 101.012, weighed by falling US bond yields. The US 2-year bond yield finished Thursday’s session flat at 3.972%, though it began Friday’s Asian session down at 3.968%.

The latest meeting minutes from the Bank of Mexico (Banxico) were released. One official commented that policy must remain restrictive for at least a couple of years, while another member mentioned that core inflation had shown “greater persistence.” That member commented that the effects of the restrictive policy would be felt “clearly” in the second half of 2024.

Lastly, the minutes showed that the board would continue to consider the inflation outlook when deciding to continue its hiking campaign.

USD/MXN Technical Analysis

The USD/MXN is testing support at the 18.0000 figure, which, once cleared, it could pave the way for further downside. Therefore, the USD/MXN pair’s next support would be the weekly low of 17.9749, followed by the April 3 swing low at 17.9644. Break below, and the USD/MXN will test the YTD Low at 17.8968. On the flip side, the USD/MXN first resistance would be 18.1219, followed by the 20-day EMA at 18.2085, before reclaiming the April 5 high at 18.4010.