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The USD/MXN crosses over the 18.00 mark as traders seek refuge.

by Elena Martin   ·  March 9, 2023  
As buyers entered the market, the USD/MXN became positive and pushed prices over 18.00. US Initial Jobless Claims increased, indicating that the Fed would gradually raise rates.

Analysts predicted that Banxico might increase in increments of 25 basis points when the inflation rate in Mexico decreased. The Mexican Peso (MXN) is under pressure on Thursday; the USD/MXN has recovered again into the 18.0800 regions after falling to fresh 5-year lows at 17.8967. In anticipation of the publication of crucial US economic data, including the US Nonfarm Payrolls and the CP for the next week, traders purchased the US Dollar (USD). As a result, the USD/MXN rises 0.60% and is now trading at 18.0860.

Unemployment claims increased, although they helped the USD against the MXN.
As seen by Wall Street reversing its previous gains, the market’s attitude has worsened. Initial Jobless Claims for the week ending on March 4 were 211K more than anticipated at 195K, according to the Bureau of Labor Statistics (BLS). Notwithstanding an increase in claims, the ADP Employment Change data and job opportunities continued to show a tight labor market, supporting Jerome Powell, the chair of the Federal Reserve, when he spoke before the US Congress.

The pair rebound towards the weekly highs at around 18.1788 is restrained by the US Dollar Index (DXY), down 0.38% and trading at 105.250.

Inflation in Mexico decreased in both the headline and core estimates. The Consumer Price Index for February was at 7.62% YoY, falling short of forecasts of 7.68% and 7.91% from the prior month. Core CPI increased at 8.29% YoY, above expectations but falling short of January’s 8.45%.

But, according to analysts at Scotiabank, upcoming data and the forecast for the Fed continue to be major factors in the bank’s decision. “Today’s (inflation) print lessens the probability that (the Mexican central bank) decides to go through with a 50 bps raise,” they said.

The USD/MXN increased beyond $18.00 with the publication of Mexican inflation data, extending its gains ahead of a busy US economic calendar. Even still, the bias is down. However, it might become neutral if buyers take back 18.3000.

Price movement for USD/MXN:

After many days of trading below the $18.00 ceiling, the USD/MXN mounts a comeback. But, USD/MXN bulls must first retake the weekly high at 18.1788 and then the 20-day Exponential Moving Average (EMA), both located at 18.2898, before they can declare triumph. After that, the USD/MXN may consolidate between 18.1800 and 18.3000 before attempting to target the 50-day EMA at 18.6430. If this doesn’t happen, the USD/MXN is in danger of dropping below 18.0000, which might lead to a new YTD low print.

Source: FX Street

What should I watch?

Source: FX Street