- USD/MXN is a little higher amid thin market volumes with US market participants away for the day.
- The peso is a little weaker despite risk on and strong crude prices, perhaps weighed by dovish Banxico vibes.
USD/MXN is seeing subdued, rangebound price action on the first trading day of the week. Volumes are very low given that US market participants are away for Presidents’ Day and now that European participants have left for the day. 19.90 (last week’s lows) has proven to be a solid floor for the price action, whilst USD/MXN’s 50-day moving average at 19.97 has been a solid ceiling. At present, the pair trades in the 19.95s, up a modest 0.1% on the day.
Driving the day
The US dollar is a little weaker on the day versus most of its G10 counterparts (aside from JPY), amid a risk-on tone to trade. Meanwhile, crude oil prices are up, boosted further by supply concerns in the Gulf of Mexico amid adverse Arctic weather conditions. This mix of a softer USD and higher crude oil prices would typically be a positive mix for the Mexican peso, but this has not been the case on Monday.
Perhaps the peso is struggling in wake of dovish commentary from a Banxico policymaker at the end of last week; Mexico could see a further two rate cuts in 2021 if inflation stays in line with expectations, said Banxico Deputy Governor Gerardo Esquivel late last Friday. His comments came after the bank, as expected, cut interest rates to 4.0% last Thursday, the lowest the bank’s key lending rate had been since 2016.
Long-term USD/MXN downtrend intact
Recent depreciation in the USD/MXN exchange rate shows that the pair’s long-term downtrend, which has been in play since 27 April 2020, remains a crucial driver of price action. The downtrend linking the 27 April 2020, 25 September 2020, 4 November 2020 and early this month highs has been well respected, implying USD/MXN’s bias remains towards more downside. Traders are likely to continue to target an eventual move back towards 2021 lows just under 19.60.
USD/MXN daily chart
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.