USDMXN has been trading lower since its peak in April 2020. This pair is important due to its correlation with the USDindex and its implications across markets. The Mexican peso stabilised around the 17.2 level in November, sustaining a six-day rally, as weakening inflation and high unemployment in the US fuelled expectations that the Fed had completed its rate hike, putting pressure on the US Dollar.
Meanwhile, Banxico kept its benchmark interest rate at the current record level of 11.25% at its latest meeting, emphasising its commitment to tight monetary policy. October’s headline and core inflation figures fell to 4.26% and 5.5% respectively, with the bank’s target of 3% only expected to be reached by 2025, as projections highlight potential upside risks to inflation. Adding leeway to the hawkish guidance, strong business confidence and robust PMIs underline the resilience of the Mexican economy to high borrowing costs.
The exotic pair’s support is seen around 17.00 with the possibility of a downside extension of the wave further below 16.99, if the price holds below the 17.28 resistance for longer. The interim rebound of 17.06 is still seen weak below the 52 EMA [blue_line] in the H4 period. Further downside momentum is projected for FE100% [from 18.49–17.28 and 17.93 drawdown at 16.73]. On the upside, a move above 17.28 will cloud the outlook and the pair could test the 50%FR/61.8%FR retracement levels at 17.50 and 17.60 respectively from the short-term measurement of 17.93 to 17.06.
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Ady Phangestu
Market Analyst – HF Educational Office – Indonesia
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