USD/MXN stays indecisive around mid-18.00s ahead of US PMI, Durable Goods Orders

• USD/MXN retreats from intraday high, braces for the first weekly loss in three.
• Mixed US, Mexican data challenge traders but downbeat yields keep bears hopeful.
• Banking crisis, Fed bets tease buyers amid sluggish session.
• Busy calendar can entertain momentum traders during the one last shot of a volatile week.

USD/MXN stays defensive near 18.58-59 during early Friday, following a retreat from the intraday high during a sluggish session. Even so, the Mexican Peso pair remains well-set for the first weekly loss in three amid the broad US Dollar, despite the latest rebound in the greenback.

It’s worth noting that the fears of a ballooning Fed balance sheet renew hawkish calls for the US central banks and join the global banking turmoil to weigh on the sentiment and allow the US Dollar to lick its wounds near the seven-week low. That said, the US Dollar Index (DXY) stays defensive near 102.60 after bouncing off a seven-week low the previous day but the US 10-year and two-year Treasury bond yields remain depressed around 3.39% and 3.80% respectively by the press time.

Apart from the Fed bets, comments from US Treasury Secretary Janet Yellen and Chair of the Basel Committee on Banking Supervision also weigh on the market’s mood and probe the USD/MXN bears.

“China and Russia may want to develop an alternative to the US dollar,” while also showing preparedness for additional deposit actions `if warranted'. “Strong actions have been taken to ensure deposits are safe,” said US Treasury Secretary Yellen. Elsewhere, the Financial Times (FT) said that the head of the world’s top financial regulator, Pablo Hernández de Cos, has called for tighter rules to clamp down on risks spreading from so-called “shadow banks” to other parts of the banking system.

On Thursday, Mexico’s 1st half-month Inflation for March dropped to 0.15% from 0.28% expected and 0.3% prior while the Core Inflation reading matched 0.30% forecasts versus 0.35% previous readings. However, the Retail Sales grew notably, with 5.3% YoY versus 3.0% expected and 2.5% prior, for March and helps the Mexican Peso (MXN) to remain firmer.

On the other hand, the US Chicago Fed National Activity Index (CFNAI) dropped to -0.19 in February versus 0.0 expected and 0.23 prior. Further, Weekly Initial Jobless Claims declined to 191K for the week ended on March 18, versus 192K prior and 203K market forecasts. It should be noted that the US New Home Sales rose 1.1% in February from 1.8% prior, versus 1.6% analysts’ estimation, whereas Kansas Fed Manufacturing Index for March rose to 3.0 from -9.0 prior and 6.0 expected.

Looking ahead, preliminary readings of the US S&P Global PMIs for March and the Durable Goods Orders for February will be crucial for the USD/MXN traders to watch. However, major attention should be given to the banking headlines and Fed bets for clear directions.

Technical analysis

Despite repeated bounces off the 18.50 horizontal support, the USD/MXN bears remain hopeful unless the quote offers a daily closing beyond the 50-DMA hurdle of 18.60.