MEXICAN LAUNDRY KEY POINTS:
- USD / MXN continues to rise, albeit at a very slow pace
- The recovery in US Treasury yields has created a more constructive outlook for the dollar in the near term
- On Wednesday, traders will closely monitor US consumer price data. If inflation rises more than expected, yields could continue to rise, considering the short-term Mexican peso
USD/ MXN has continued to rise this week, following the withdrawal of support near 19.80 earlier this month. It is the main catalyst during this period US dollarthe strength of the treasury has been the recovery. For example, in the last six days, the ten-year US interest rate has risen from 1.12% to a low of 1.34%, an increase of 22 bps in such a short time.
If inflationary pressures in the US do not slow down, Treasury yields could rise further in the coming days and the EMFX will be considered. Traders should get a better picture of the consumer price trend on Wednesday when the Bureau of Labor Statistics publishes its latest inflation report.
In terms of forecasts, The July title of the CPI is wait for retreat 5.3% and-oi from 5.4% yoy in June, while the core indicator is seen cooling 4.3% yoy from 4.5% y-last month. If the data finally comes as a surprise, long-term returns may become stronger as the market brings tighter expectations (narrowing) to the Fed strengthening the labor market. This scenario could raise the greenback in general, raising the USD / MXN higher in the near future.
Another source of traders and USD / MXN volatility is the Banxico interest rate decision on Thursday. The central bank will increase borrowing costs by 25 basis points to 4.50% June meeting the same great hike. Because the gear is fully engaged in the curve, traders are paying more attention to this further instructions to see if policymakers intend to tighten monetary policy further in an effort to stem inflation. That said, any hawkish message will likely to be positive for the Mexican peso in the medium term. In a shorter time, however yield dynamics In the United States, it directs pricing and has a stronger impact on emerging market currencies
USD / MXN TECHNICAL ANALYSIS
From the technical perspective, if USD/MXN marches on higher, first resistance appears to consider 20.20 / 20.25 In the area. To build momentum, buyers would need push the price above it barrier decisively. If what happens, the couple could be on their way to conquer the highest level in june at 20.75. On the backwhen bears gain control of the market and move on USD / MXN lower, key support will be at 19.80. If the price breaks it floor, there is room to move towards the lowest level in June near 19.60.
USD / MXN TECHNICAL TABLE
EDUCATIONAL INSTRUMENTS FOR TRADE
– Written by DailyFX market strategist Diego Colman