CFD Trading Rate US Dollar vs Mexican Peso (USDMXN)

• USD/MXN price tests the nine-day EMA at the 18.81 level, followed by the lower boundary of the channel.
• The 9-day EMA is higher than the 50-day EMA, indicating a bullish signal for the short-term price trend.
• A return to the ascending channel would reinforce the bullish bias, leading the pair to test the upper boundary.

The USD/MXN pair halts its four-day losing streak, trading around 18.70 during the European session on Monday. The daily chart analysis shows that the pair is consolidating below an ascending channel pattern, indicating a potential weakening of the bullish bias.

Additionally, the 14-day Relative Strength Index (RSI) is positioned slightly above the 50 level, suggesting a bullish momentum. Further movement may offer a clear directional trend.

Moreover, the 9-day Exponential Moving Average (EMA) is higher than the 50-day EMA, indicating a bullish signal for the USD/MXN pair. This suggests that the short-term price trend is stronger than the long-term trend, which could imply upward momentum in the asset's price.

On the upside, the nine-day Exponential Moving Average (EMA) at the 18.81 level serves as an immediate barrier, followed by the lower boundary of the ascending channel around the 19.00 level.

A return to the ascending channel would reinforce the bullish bias, potentially leading the USD/MXN pair to explore the region around the upper boundary of the ascending channel at 20.06, the highest level since October 2022, which was reached on August 5.

In terms of support, the 50-day EMA at 18.35 appears as a key support level. A break below this level could initiate the emergence of the bearish bias and push the USD/MXN pair to navigate the area around throwback support at the 17.60 level.

USD/MXN: Daily Chart

• USD/MXN extends the decline around 18.60 in Friday’s early Asian session. 
• The expectation of a Fed rate cut in September supports the Mexican Peso. 
• The Mexican Peso remains strong despite a surprise rate cut by Banxico last week.

USD/MXN trades in negative territory for the fourth consecutive day around 18.60 during the early European trading hours on Friday. The further downside of the pair is backed by the expectation that the US Federal Reserve (Fed) would cut at least a 25 basis point (bps) in September. Investors will monitor the preliminary US Michigan Consumer Sentiment Index for August, Building Permits, and Housing Starts, which are due later on Friday. Also, the Fed's Austan Goolsbee is set to speak. 

The upbeat US economic data on Thursday, including Initial Jobless Claims and Retail Sales, eased fears about a potential recession in the United States. However, traders are still expecting the Fed to cut its interest rate in September, which weighs on the Greenback in the near term. The market is now fully priced for a 25 basis points (bps) Fed rate cut in September and nearly 20% priced for a 50 bps cut, according to the CME FedWatch tool. 

The upside of the Mexican Peso occurred despite a surprise rate cut by Mexico’s central bank (Banxico) last week, lowering interest rates by 25 bps from 11% to 10.75%. Mexican economist Alexis Milo, former chief economist at HSBC México, noted, “The markets in the US are having their best day in more than a year, and that is allowing the peso to recover. This effect prevailed over the depreciation that we would have expected with a rate cut. ” 

• USD/MXN continues to lose ground due to the dovish mood surrounding the Fed.
• The downside of the US Dollar is retrained due to improved Treasury yields.
• The Mexican Peso may struggle as traders expect Banxico to adopt a dovish stance regarding its policy outlook.

USD/MXN extends its losses from the previous session, trading around 18.80 during Thursday’s European hours. This decline of the USD/MXN could be attributed to the increasing expectations of at least a 25 basis point rate cut by the US Federal Reserve (Fed) in September.

The US Dollar (USD) remains tepid ahead of the release of US Initial Jobless Claims and Retail Sales data scheduled for Thursday. The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against other six major peers, received support from the improved Treasury yields. The DXY trades around 102.60 with 2-year and 10-year yields on US Treasury bonds standing at 3.95% and 3.82%, respectively, at the time of writing.

The moderate increase in the annual US Consumer Price Index (CPI) has sparked debate about the extent of the Fed’s potential rate cut in September. Traders are favoring a more modest 25 basis point reduction, with a 60% probability, while a 50 basis point cut is still on the table. According to CME FedWatch, there is a 36% chance of the larger cut occurring in September.

In Mexico, last week’s data showed that the INEGI Consumer Confidence index fell to 46.9 in July, down from 47.5 in June, which has contributed to a dovish outlook from the Bank of Mexico (Banxico). Additionally, Banxico Governor Victoria Rodríguez Ceja endorsed the recent interest rate cut to 10.75%. Although headline inflation is at 5.57%, she defended the rate reduction by highlighting the decline in core prices over the past 18 months.

Traders are expected to closely monitor the Retail Sales data for June, which will be released on Tuesday. Later in the week, attention will turn to the first-half-month Inflation data and the Banxico Monetary Policy Meeting Minutes, both scheduled for release on Thursday.

• USD/MXN continues its losing streak despite a rate cut by Banxico on Thursday.
• Mexico's 12-Month Inflation rose to 5.57% in July, the highest reading since May 2023.
• The US Dollar could receive support from the rising safe-haven flows amid heightened Middle-East tensions.

USD/MXN extends its losing streak for the third successive session, trading around 18.90 during the late Asian hours on Friday. This decline comes despite the Bank of Mexico's (Banxico) unexpected decision to cut the benchmark rate to 10.75% from 11.00% at Thursday’s meeting.

Banxico hinted at possible further rate adjustments, citing ongoing inflationary risks. The 12-Month Inflation Rate rose to 5.57% in July, up from 4.98% previously, and matching market estimates. This is the highest reading since May 2023.

Meanwhile, Core Inflation increased by 0.32%, slightly above the forecast of a 0.29% rise. Headline Inflation also rose by 1.05% in July, the largest increase in nearly three years, and slightly above the estimated 1.02% advance.

The US Dollar Index (DXY), which tracks the value of the US Dollar (USD) against six major currencies, edging lower to near 103.20. The decline in US Treasury yields is exerting additional pressure on the Greenback, with yields standing at 4.01% and 3.97%, respectively, at the time of writing.

The US Dollar faces challenges amid increasing expectations that the Federal Reserve (Fed) may implement a quarter-basis point rate cut in September. Traders evaluate mixed signals from the US economy, trying to determine whether it will experience a soft landing or slip into a recession.

The downside of the Greenback could be limited due to rising safe-haven flows amid heightened geopolitical tensions in the Middle East. Israeli forces intensified their airstrikes on the Gaza Strip, resulting in at least 40 casualties on Thursday, according to Palestinian medics.

This escalation has further intensified the conflict between Israel and Hamas-led militants, as Israel prepares for the possibility of a broader regional conflict following the killing of senior members of militant groups Hamas and Hezbollah.

• USD/MXN trades back and forth above $19.00 despite the volatile US Dollar.
• The Fed is expected to bring down interest rates aggressively.
• USD/MXN trades inside the Rising Channel chart pattern.

The USD/MXN pair trades in a limited range above the crucial support of 19.00 in Thursday’s European session. The asset consolidates from the last three trading sessions despite the US Dollar (USD) exhibiting sheer volatility.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, corrects to near 103.00 on firm speculation that the Federal Reserve (Fed) will pivot to policy-normalization aggressively. 10-year US Treasury yields tumble to near 3.90%.

Meanwhile, investors await the United States (US) Initial Jobless Claims data for the week ending August 2, which will be published at 12:30 GMT. Investors will keenly focus on the weekly jobless claims as it is the only data available that will provide some cues about the current status of the labor market.

On the Mexican Peso front, the Mexican currency will be influenced by the spectre of controversial reforms to Mexico's constitution set for votes next month, including a potential judicial overhaul that would subject judges to popular vote, Reuters reported.

USD/MXN trades in a Rising Channel formation on a daily timeframe in which each pullback is considered as buying opportunity by market participants. The asset appears to be in a strong uptrend as the 20-day Exponential Moving Average (EMA) near $28.70 slopes higher.

The 14-day Relative Strength Index (RSI) oscillates in the 60.00-80.00 range, suggesting a strong upside momentum.

Fresh upside would appear if the asset breaks above August 6 high of 19.61, which will drive the asset towards fresh annual high near $20, followed by almost two-year high of 20.50.

USD/MXN daily chart

• USD/MXN could limit its downside amid rising US Treasury yields.
• The Mexican Peso may struggle as the Banxico may reduce borrowing costs at Thursday’s meeting.
• CME FedWatch tool suggests 67.5% odds of a 50-basis point Fed rate cut in September, up from 13.2% last week.

USD/MXN trades around 19.30 during the early European hours on Wednesday after breaking its four-day winning streak. The Mexican Peso (MXN) gains ground due to possible improved risk appetite. However, the downside of the USD/MXN pair could be limited as US Dollar (USD) advances amid rising Treasury yields.

Mexico’s Auto Exports fell by 1.6% year-on-year to 271,496 units in July, breaking a streak of twenty consecutive months of growth. This decline highlights the ongoing economic slowdown, which, along with lower inflation readings, might prompt the Bank of Mexico (Banxico) to consider lowering borrowing costs at its upcoming meeting. Traders will likely observe the inflation data before the policy decision on Thursday.

The US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, trades around 103.20 with 2-year and 10-year yields on US Treasury bonds standing at 4.00% and 3.90%, respectively, at the time of writing.

However, the upside of the USD/MXN could be retrained due to increasing odds of a relatively higher rate cut starting in September after the weaker US labor data for July raised the fear of a looming US recession. According to the CME FedWatch tool, there is now a 67.5% probability of a 50-basis point (bps) interest rate cut by the US Federal Reserve (Fed) in September, up from 13.2% a week earlier.

According to Reuters, Federal Reserve Bank of San Francisco President Mary Daly noted on Monday that “risks to the Fed's mandates are becoming more balanced and that there is openness to the possibility of cutting rates in upcoming meetings.” Additionally, Chicago Fed President Austan Goolsbee stated that the central bank is prepared to act if economic or financial conditions worsen.

• USD/MXN trades near its highest level of 20.23 since September 2022
• A broad selloff in financial markets has negatively impacted emerging market currencies like the Mexican Peso.
• San Francisco President Mary Daly noted that there is openness to the possibility of cutting rates in upcoming meetings.

USD/MXN trades around 19.30 during the early European session on Tuesday, following a retreat from its highest level of 20.23 since September 2022, reached on Monday. The USD/MXN pair faced challenges due to increased risk aversion. Recent downbeat labor market data from the United States (US) has raised concerns that the Federal Reserve may be falling behind in addressing an economic downturn.

Growth worries in the United States have triggered a broad selloff in financial markets, which has negatively impacted emerging market currencies such as the Mexican Peso. However, the upside of the USD/MXN pair could be limited as the US Dollar (USD) could struggle due to the expectation of a 50-basis point (bps) interest rate cut by the US Federal Reserve (Fed) in September. The CME FedWatch tool shows a 74.5% probability of this rate cut at the September meeting, up sharply from the 11.4% chance reported just a week ago.

According to Reuters, Federal Reserve Bank of San Francisco President Mary Daly expressed increased confidence on Monday that US inflation is moving towards the Fed's 2% target. Daly noted that “risks to the Fed's mandates are becoming more balanced and that there is openness to the possibility of cutting rates in upcoming meetings.”

The Mexican Peso (MXN) faces challenges as concerns about a slowing economy raise speculation about a potential dovish shift from the Bank of Mexico (Banxico). Mexico’s Gross Domestic Product (GDP) grew by only 0.2% in the second quarter ending in June, down from the 0.3% growth recorded in the previous quarter. Traders are expected to focus on the July Auto Exports data due on Tuesday, with further attention turning to inflation data and Banxico’s monetary policy decision on Thursday.

• USD/MXN may depreciate as the momentum indicator 14-day RSI indicates a potential correction.
• A four-month high of 18.99 acts as an immediate resistance level.
• The pair could find support at the lower boundary of the ascending channel around the 18.70 level.

USD/MXN extends its gains for the second session, trading around 18.90 during the European hours on Friday. The analysis of the daily chart indicates the bullish bias as the pair is moving higher within an ascending channel.

However, the 14-day Relative Strength Index (RSI), a momentum indicator, is positioned at the 70 level, indicating that the USD/MXN pair is overbought. This suggests that a correction could be imminent.

On the upside, the USD/MXN pair tests a four-month high of 18.99 recorded on June 12.  A breakthrough above this level could reinforce the bullish bias to test the upper boundary of the ascending channel near the level of 19.20.

In terms of support, the lower boundary of the ascending channel around the level of 18.70 could act as immediate support. Next support appears at the nine-day Exponential Moving Average (EMA) at 18.59. A break below this level could weaken the bullish sentiment and lead the USD/MXN pair to navigate the area around throwback support at the level of 17.60.

USD/MXN: Daily Chart

• USD/MXN receives support due to increased risk-off sentiment ahead of the ISM PMI release on Thursday.
• The US Dollar advances as Treasury yields rebound from multi-month lows.
• The Mexican Peso may struggle as a slowing economy reinforces the dovish sentiment surrounding the Banxico.

USD/MXN retraces its recent losses from the previous session, trading around 18.70 during the early European hours on Thursday. The US Dollar (USD) receives support from a correction in Treasury yields, underpinning the USD/MXN pair.

However, this upside of the USD/MXN pair could be limited due to the dovish sentiment surrounding the Federal Reserve’s (Fed) policy trajectory. Fed decided to keep rates unchanged in the 5.25%-5.50% range at its July meeting on Wednesday.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six other major currencies, trades around 104.10 with 2-year and 10-year yields on US Treasury bonds standing at 4.28% and 4.05%, respectively, at the time of writing.

During a press conference post-interest rate decision, Federal Reserve Chair Jerome Powell stated that a rate cut in September is "on the table," while the Federal Open Market Committee (FOMC) did not want to commit to anything in the statement. Powell added that the central bank will closely monitor the labor market and remain vigilant for signs of a potential sharp downturn, per Reuters.

The Mexican Peso (MXN) weakened as concerns over a slowing economy fueled speculation about a more dovish stance from the Bank of Mexico (Banxico). Recent data showed that Mexico's Gross Domestic Product (GDP) grew by just 0.2% in the second quarter ending in June, down from the 0.3% growth recorded in the previous quarter.

Additionally, the Fiscal Balance showed a deficit of 166.74 billion Pesos in June, a decrease from the previous deficit of 174.89 billion Pesos.

Traders anticipate further direction from upcoming US economic data, including the ISM Manufacturing PMI and weekly Initial Jobless Claims, both set to be released later on Thursday. Meanwhile, Mexico's Jobless Rate data will be announced on Friday.

• The USD rally loses steam as risk aversion ebbs.
• Hopes of a dovish turn by the Federal Reserve are adding negative pressure to the Dollar
• USD/MXN bullish trend remains intact, with downside attempts held above 18.60.

The US Dollar is practically flat on the daily chart, consolidating gains following a five-day rally. Bulls met resistance at the 18.75 area on Monday and the pair has remained trading sideways on Tuesday, with downside attempts limited above 18.60 so far.

A somewhat brighter market sentiment is weighing on the safe-haven US Dollar and hopes of some dovish hint after the Fed meeting are adding pressure on the USD.

Recent US Data has fuelled hopes of a September cut

The US labour market is showing signs of exhaustion, unemployment increased in June, and inflation is finally drawing close to the 2% level. Data released last week revealed that the PCE Prices Index remained at unchanged at a 2.5% yearly rate in June.

These figures have boosted expectations that the Bank might start cutting rates in September, instead of December as previous Fed projections suggested.

In this context, Wednesday’s Fed monetary policy decision will be closely watched. The bank will highly likely leave rates unchanged, but any signal towards earlier rate cuts is likely to weigh on the USD.

USD/MXN consolidates with the bullish trend intact

From a technical perspective, the pair is consolidating gains ahead of the meeting. The broader bias remains bullish, with resistances at 18.80 and 19.00. Supports are 18.60 and 18.30.

• USD/MXN extends winning streak despite the dovish sentiment surrounding the Fed.
• The upside of the US Dollar could be limited due to declining US Treasury yields.
• The MXN may limit its downside as mid-month inflation data for July could deter Banxico from easing policy.

USD/MXN continues to gain ground for the fifth successive session, trading around 18.50 during the European hours on Monday. The USD/MXN pair gained ground as the US Dollar has recovered its intraday losses. However, the downside in the US Treasury yields may weaken the Greenback, limiting the upside of the pair.

US Dollar Index (DXY), which measures the value of the US Dollar against the six other major currencies, holds minor gains around the level of 104.40 with yields on US Treasury bonds standing at 4.37% and 4.17%, respectively, at the time of writing.

Additionally, signs of cooling inflation and easing labor market conditions in the United States (US) have fueled expectations of three rate cuts this year by the Federal Reserve (Fed), starting in September. This has put pressure on the US Dollar.

On Friday, the US Personal Consumption Expenditures (PCE) Price Index indicated a modest rise in inflation for June and provided further signs of easing price pressures. The US PCE Price Index rose by 2.5% year-over-year in June, down slightly from 2.6% in May, meeting market expectations. The PCE Price Index increased by 0.1% month-over-month after being unchanged in May.

In Mexico, mid-month inflation data for July could dissuade the Bank of Mexico (Banxico) from easing policy due to the risks of second-round effects, which Goldman Sachs economists suggest could extend to core inflation components.

Additionally, analysts at Citi Research now estimate that annual inflation will end at 4.30%, up from the previous forecast of 4.20%, with core inflation expected to finish 2024 at 4.0%. Mexico's economic growth is projected to slow, with an anticipated growth rate of 1.9%, down from 2.0% in the previous poll.