The Mexican Peso (MXN) continued its impressive winning streak against the US Dollar (USD) on Friday, reaching new highs as the Greenback faltered under the weight of recent weak economic data. The MXN’s gains were further fueled by hawkish comments from Banxico Deputy Governor Jonathan Heath, who echoed the Fed’s cautious approach to rate cuts.
Market Drivers: Weak US Data and Hawkish Banxico Commentary
- US Economic Slowdown Concerns: Disappointing ISM Services PMI and rising jobless claims have raised concerns about the US economy’s health, leading to increased speculation of Fed rate cuts and weakening the US Dollar.
- Banxico’s Hawkish Stance: Deputy Governor Heath’s comments, emphasizing the need for sustained evidence of disinflation before considering rate cuts, have boosted confidence in the Mexican central bank’s commitment to price stability.
- Easing Political Risks in Europe: Reduced concerns about the outcome of French elections have supported the Euro, indirectly benefiting the MXN.
Technical Analysis: USD/MXN Slide Continues, Targeting Key Support
The USD/MXN pair is extending its decline, with the June 24th swing low of 17.87 acting as the next key support level. A break below this level could confirm a new downtrend and potentially target the 50-day Simple Moving Average (SMA) at 17.50.
The pair’s recent price action suggests a potential shift towards a sideways trend, but further confirmation is needed. A rebound above 18.59 would signal a resumption of the uptrend, targeting 18.68 and 19.00.
Key Takeaways:
- The Mexican Peso is strengthening against the US Dollar as weaker US economic data and hawkish Banxico commentary fuel the rally.
- The upcoming US Nonfarm Payrolls (NFP) report could further impact the pair’s trajectory.
- Technical analysis suggests a potential continuation of the USD/MXN downtrend, with key support levels to watch.