USD/MXN drops despite Banxico’s rate hold, traders await Powell’s speech

• Mexican Peso is resilient despite Banxico keeping rates unchanged.
• USD/MXN loses ground amidst robust US economic data.
• Powell’s upcoming speech to determine USD/MXN direction.

The Mexican Peso (MXN) shrugs off the second interest rate pause by the Bank of Mexico (Banxico), advancing against the US Dollar (USD) as the USD/MXN trades with a negative tone, down 0.15%. The USD/MXN trades with losses after hitting a daily high of 17.1400, exchanging hands at 17.070.

US Durable Good Order, Consumer Confidence, fails to halt the USD/MXN downtrend

Market sentiment is upbeat, as portrayed by Wall Street climbing after posting back-to-back days with losses. Positive data from the United States (US) could not derail the USD/MXN downtrend, as the emerging market currency remains one of the strongest peers trading against the US Dollar, with the USD/MXN posting losses of -12.18%.

Data from the US Department of Commerce showed that Durable Good Orders edged above estimates and crushed April’s data, which was revised, with figures coming at 1.7% MoM, above forecasts of a -1% plunge and April’s 1.2% expansion. Meanwhile, US New Home Sales surprisingly climbed at the fastest pace over one year, up at 12.2% MoM in Ma, compared to April’s 3.5% expansion. New home Sales hit the 763K threshold, above April’s 680K.

The Conference Board (CB) revealed that Consumer Confidence in June improved to 109.7, crushing estimates of 104 and above May’s 10.5 figures. The survey showed an improvement in the labor market, with inflation slowing and income expectations downtick.

In the meantime, the lack of economic data from Mexico keeps investors weighing the latest monetary decision of Banxico, with the central bank keeping rates at 11.25%, unchanged for back-to-back monetary policy meetings. Banxico’s Deputy Governor Jonathan Heath said the bank would do all necessary to bring inflation to its 3% +/- target while emphasizing the need to keep rates high for a prolonged period.

Given the fundamental backdrop, USD/MXN traders will look for Federal Reserve (Fed) Chair Jerome Powell’s speech at a European Central Bank (ECB) event on Wednesday and Thursday. Market participants estimate Powell to keep the FOMC-s press conference tone, leaning towards a neutral stance.

USD/MXN Price Analysis: Technical outlook

From a technical perspective, the USD/MXN remains downward biased, but sellers are losing steam and unable to break the 17.00 figure. If USD/MXN breaks below the latter, the following support to emerge would be the October 2015 daily low of 16.3267 before the 16.00 psychological level emerges. On the flip side, the USD/MXN buyers must reclaim the 20-day Exponential Moving Average (EMA) at 17.2731 before challenging the May 16 swing low of 17.4039 to have a chance to shift the pair bias.