The Mexican Peso (MXN) weakened against its major counterparts on Monday, reflecting souring market sentiment driven by global growth concerns and political uncertainty in France. As a risk-sensitive currency, the Peso is susceptible to these external factors.
Market Drivers: Global Growth Fears and Political Risks
- China’s Slowdown: Weaker-than-expected Chinese manufacturing data and a decline in commodity imports due to rising prices have sparked concerns about global economic growth.
- Fed’s Cautious Stance: The US Federal Reserve’s (Fed) cautious tone at its recent meeting, signaling a reluctance to cut interest rates quickly, has added to the overall market unease.
- French Political Uncertainty: The outcome of the upcoming French legislative elections and potential political instability is adding to the risk-off sentiment.
- Banxico Intervention: Despite the Peso’s recent recovery following verbal intervention by Banxico’s President, underlying concerns about the new government’s potential policy direction remain.
Technical Analysis: USD/MXN Resumes Uptrend, But Correction Risks Remain
The USD/MXN pair appears to be resuming its short-term uptrend after a brief pullback. The Relative Strength Index (RSI) has just exited the overbought zone, suggesting a potential for further correction. However, the established uptrend is likely to continue, with the next target at the March 2023 high of 19.22.
The long-term trend remains uncertain following the break above the October 2023 high. While the recent uptrend suggests bullish momentum, a deeper correction could unfold before the pair resumes its upward trajectory.