Mexican Peso (USDMXN). Selling opportunity in the short term?
Fundamental analysis
Signs of strength in the US economy supported expectations that the Fed will take a more cautious approach to interest rate cuts. Although some US economic indicators showed a slight slowdown, markets pointed to robust jobs and September consumer inflation data.
Rising odds of a Trump victory in the November election also increase speculations that the Fed will be moderate in terms of cutting interest rates, due to Trump's policies on tariffs, immigration, and taxes being seen as inflationary. According to CME FedWatch tool, the odds of a 0.25% rate cut in the November meeting are around 92%, with no odds on a 0.50% cut.
Locally, Bank of Mexico minutes highlighted the need for a less restrictive monetary policy, while Banxico’s survey revealed that economists estimate the central bank will lower rates by 0.50% for the rest of 2024. The divergence between the Fed and Banxico's monetary policies added pressure to the Mexican Peso.
Meanwhile, Trump proposed imposing up to 300% tariffs on Mexican-made cars, raising concerns about disruptions to Mexico's automotive sector.
Technical analysis
From a technical perspective, the Mexican Peso stabilized this week after testing the Fibonacci level support at 38.5% (around 19.20). The price is approaching the latest high at 20.20, but the RSI is in the overbought zone, which could suggest a correction to the downside in the short term.
Signs of strength in the US economy supported expectations that the Fed will take a more cautious approach to interest rate cuts. Although some US economic indicators showed a slight slowdown, markets pointed to robust jobs and September consumer inflation data.
Rising odds of a Trump victory in the November election also increase speculations that the Fed will be moderate in terms of cutting interest rates, due to Trump's policies on tariffs, immigration, and taxes being seen as inflationary. According to CME FedWatch tool, the odds of a 0.25% rate cut in the November meeting are around 92%, with no odds on a 0.50% cut.
Locally, Bank of Mexico minutes highlighted the need for a less restrictive monetary policy, while Banxico’s survey revealed that economists estimate the central bank will lower rates by 0.50% for the rest of 2024. The divergence between the Fed and Banxico's monetary policies added pressure to the Mexican Peso.
Meanwhile, Trump proposed imposing up to 300% tariffs on Mexican-made cars, raising concerns about disruptions to Mexico's automotive sector.
Technical analysis
From a technical perspective, the Mexican Peso stabilized this week after testing the Fibonacci level support at 38.5% (around 19.20). The price is approaching the latest high at 20.20, but the RSI is in the overbought zone, which could suggest a correction to the downside in the short term.
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