USD/MXN falls to lows since 2015 following US Core CPI

• USD/MXN printed a fresh cycle low on Friday of 16.62 and is poised to close a 1.70% weekly loss.
• Core US CPI retreated to 4.1% YoY in June.
• Falling US yields limit the Greenback’s advance as markets start to place bets on the September meeting.

On Friday, the USD/MXN pair fell to its lowest point since December 2015, this time weakened but soft Core Personal Consumption Expenditures (PCE) figure from June.

In that sense, the figures, which act as an essential gauge of inflation for the Federal Reserve (Fed), dropped to 4.1% YoY in June, lower than the 4.2% expected and the previous 4.6%. Its worth noticing that regarding September’s meeting, Jerome Powell added that the Fed can pause or hike and will depend solely on the data, so soft inflation figures make a case for a pause stronger, making the US yields decrease across the board.

However, the economic outlook from the US is strong as on Thursday, positive Q2 Gross Domestic Product (GDP) was reported, along with robust Durable Goods and Jobless Claims data. That being said, the next two set of inflation and job report figures before the Federal Open Market Committee (FOMC) meeting will be the ones which model the tightening expectations.

USD/MXN Levels to watch

The daily and weekly charts show that the technical outlook is bearish. On the daily chart, the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) hint at the bears holding strong momentum while the pair trades below the 20,100 and 200-day Simple Moving Averages (SMA).

Support levels: 16.60, 16.50, 16.30.
Resistance levels: 16.90 (20-day SMA), 17.00, 17.20.