USD/MXN slash losses as US NFP surpasses estimates, Mexican Peso holds steadily

• US jobs growth exceeds estimates, yet USD/MXN slips by 0.12%.
• US Treasury bond yields’ increase lends some support to USD/MXN.
• Bank of Mexico’s stand on record high-interest rates adds resilience to the Peso.

USD/MXN trims some of its losses but remains trading negatively, despite a solid US jobs report revealed before Wall Street opened, which did not stop the Mexican Peso from reaching new weekly lows. Traders’ mood improvement, seen as US equities post gains, cushioned the MXN from falling against its counterpart, the US Dollar (USD). At the time of writing, the USD/MXN is trading at 17.5308, down 0.10%.

MXN holds its ground amidst strong US jobs data and rising US Treasury bond yields

The USD/MXN dropped sharply from around 17.5000s toward the lows of the week of 17.4190 after the US Bureau of Labor Statistics (BLS) revealed Nonfarm Payrolls in May crushed analysts’ estimates of 190K, with the economy adding 339K jobs. Although the headline figure is impressive, digging a little deep, the Unemployment Rate jumped from 3.4% to 3.7%. Regarding wages, inflation, known as Average Hourly Earnings, rose 0.3% MoM but edged down from April 4.4% to 4.3%.

Later, the USD/MXN rallied, about to erase its earlier losses, as traders digested the US jobs report, underpinned by rising US Treasury bond yields. The 10-year benchmark note rate is 3.69%, ten basis points (bps) higher than Thursday’s close.

In the meantime, the US Dollar Index (DXY), a gauge of the buck’s value against a basket of six currencies, advances 0.47%, up above 104.000, set to finish the week with losses of 0.17%.

Across the border, Mexico’s Unemployment Rate for April was 2.8%, above estimates of 2.7%. Aside from this, the latest meeting minutes of the Bank of Mexico (Banxico) showed inflation and inflationary pressures cooling down after the bank held rates at 11.25%. On Wednesday, Banxico{s Governor Victoria Rodriguez Ceja said that the institution she commands would keep rates at record high for at least the two following meetings.

USD/MXN Price Analysis: Technical outlook

Given the fundamental backdrop, the USD/MXN remains downward biased, but recent price action could form a double bottom. Even though it’s just a double dip toward the 17.4000 area, it’s worth considering due to the latest downtrend, which started in November 2021, with the USD/MXN plunging 20%. If USD/MXN surpasses that support, the next stop would be the 17.0000 figure. Otherwise, if USD/MXN reclaims the 18.0000 figure, it will conform to the double bottom. Above this area, the USD/MXN’s next stop would be the 100-day EMA at 18.2563, followed by the April 5 daily high of 18.4010.