USD/MXN tumbles to 7-week lows under 19.00, key level now at 18.90
- Mexican peso benefits from dovish FOMC meeting and also by higher crude oil prices.
- Greenback remains under pressure on lower US yields and higher equity prices.
The USD/MXN pair broke yesterday a trading range between 19.20 and 19.10 and fell to 19.00. Today continued to decline and bottomed at 18.88 the lowest since May 1. From the lows bounced modestly to the upside and as of writing was trading at 18.96, after being unable to rise back above 19.00.
From yesterday’s top, USD/MXN lost 1.40% driven by the decline of the US Dollar across the board and amid an improvement in risk appetite. The FOMC statement triggered speculations about rate cuts over the next meetings from the Federal Reserve and pushed the US Dollar sharply lower.
The suggestion that the Fed could lower interest rate could influence on Banxico’s Governing Board. “The monetary policy stance relative to that of the US” is followed closely by the Board. The others are the exchange rate pass-through and the conditions of slack in the Mexican economy. Banxico will have the opportunity to change its bias next week, at its policy meeting. Currently it has a hawkish bias. Is a more neutral statement coming, as one member of the Board keeps asking?
Levels to watch
The area around 18.90 capped the decline. A consolidation below could open the doors for a test of the 2019 low seen at 18.74. The current bias favors the downside but the mentioned barrier is a strong one, so USD/MXN could start trading in a new (lower) range between 18.90 and 19.00 or 19.10.
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