USD/MXN: Mexican Peso bulls turn cautious around 16.70 ahead of Fed inflation

• USD/MXN struggles for clear directions ahead of key data.
• Mixed prints of Mexican Q2 GDP, Fiscal Balance prod Peso buyers.
• US Dollar remains depressed as a slew of data advocates Fed policy pivot.
• US Core PCE Price Index for August eyed for directions ahead of Friday’s NFP.

USD/MXN remains sidelined on the day, as well as on a weekly basis, as it seesaws around 16.72 amid early Thursday, after witnessing downbeat performance the previous day and the last week.

That said, the Mexican Peso (MXN) pair’s latest inaction could be linked to the mixed data from Mexico, as well as the cautious mood ahead of the Fed’s preferred inflation gauge, namely the US Core Personal Consumption Expenditure (PCE) Price Index for August.

Also read: US Dollar Index: DXY drops to 103.00 on Fed policy concerns, US PCE Inflation in focus

Earlier in the week, Mexico’s second quarter (Q2) Gross Domestic Product (GDP) growth eased to 0.8% QoQ versus 0.9% expected and 1.0% prior. However, the nation’s Fiscal Balance in Pesos improved to -77.562B in July from -258.05B in previous readings.

On the other hand, the downside prints of the US statistics bolstered the call of the Federal Reserve’s (Fed) policy pivot and weighed on the US Dollar, as well as the Treasury bond yields. That said, the second readings of the US second quarter (Q2) Gross Domestic Product (GDP) Annualized declined to 2.1% from 2.4% initial forecasts while the GDP Price Index also eased to 2.0% versus the first readings of 2.2%. Further, the preliminary readings of the Personal Consumption Expenditures (PCE) Prices also edged lower to 2.5% from 2.6% prior estimations for the said period. More importantly, the ADP Employment Change dropped to 177K compared to 195K market forecasts and 371K previous readings (revised from 324K).

Earlier in the week, the US consumer sentiment and activity data, as well as the housing market numbers, favored dovish calls about the US central bank and weighed on the US Dollar, as well as the USD/MXN price.

It should be noted that the market’s optimism also weighs on the USD/MXN prices amid hopes of an end to the higher rates. While portraying the mood, the US Dollar Index (DXY) dropped for three consecutive days to the lowest level in two weeks, making rounds to 103.15-10 of late. That said, the benchmark US 10-year Treasury bond yields remain pressured at the lowest levels in three weeks, around 4.11% by the press time whereas the S&P 500 Futures remain indecisive by the press time.

Looking ahead, the US Core PCE Price Index for August, expected to remain unchanged at 0.2% MoM but edge higher to 4.2% YoY from 4.1% prior, will direct the USD/MXN pair moves.

Technical analysis

A one-month-old symmetrical triangle restricts USD/MXN moves between 16.70 and 16.85.