- US rally continues as NFP data looms at week’s end
- US economic data was soft last week, with new home sales dropping unexpectedly
- Mexico in a surprise move hiked interest rates 0.5% to 4.5%
Free forex signals – Today we have the entry price, stop-loss and take profit levels for a buy-stop order on the USD/MXN pair.
Our USD/MXN signal and forecast notes the pair has been firming as the US Dollar Index rallies, although Non-Farm Payroll data is due on Friday, so no major moves are expected before then.
The pair’s rally was in abeyance to some extent after forex traders took stock on the US Fed chairman Jerome Powell’s dovish testimony to the US Congress and US economic data coming in mixed last week.
The Flash Manufacturing PMI increased from 62.1 to 62.6 points even though analysts had expected to see a decrease to 61.5 points. Also, the Flash Services PMI dropped from 70.4 to 64.8 points, far below the 70.0 mark expectations.
In addition the New Home Sales indicator dropped unexpectedly from 817k to 769k for the four consecutive month of declines, when economists had been expecting to see an increase to 864K.
On the other hand the Current Account data improved, and was reported at -196 billion for May versus -175 billion in the previous month, but failing to reach the -205 billion forecast.
Mexico in surprise interest rate hike
Mexico’s interest rate decision on 24 June saw the Bank of Mexico’s board vote by a majority on Thursday to increase its interest rate by 25 basis points to 4.25%.
The central bank said that the move was required in order to forestall the adverse effects from inflation with expectations elevated particular with reference to the situation in the US..
Although a majority decision, only three of the five board members voted for the rise. The two dissenting voices wanted to leave the rate unchanged at 4.0%.
The decision to hike the benchmark rate was something of a surprise and perhaps follows what was seen a few days previously as a hawkish move by the US Federal Reserve, although chairman Jerome Powell has since rebalanced the perceptions of the Fed’s stance in a more dovish direction.
The Fed had seemed to suggest that interest rate rises might start in 2023, a year earlier than previously thought. Those fears have since been out to bed, but there is no sign of that from the Mexican central bank.
Mexico’s Banxico had been expected to leave interest rates unchanged.
In its previous meeting the central bank of Mexico did shift from a neutral stance on inflation to one in which it determined that the risk had shifted to the upside, so the rate increase should not perhaps be seen as quite such a surprise.
Last weeks, Dutch bank Rabobank forecast that the Mexican Peso would settle in a trading range between 19.50 to 21.0 with a slightly bias in the 19.80 to 20.60 region.
Although the Mexican rate rise strengthens the Peso it is not enough to offset the buying power behind the US dollar at the moment.
Now let’s get to today’s forex signal.
Free forex signals – Buy USDMXN
Instrument: USD/MXN
Order: BUY STOP
Entry price: 19.9337
Stop Loss: 19.7037
TP1: 20.1687
Recommended Risk: 1%
Risk / Reward Ratio: 1:1
Signal validity period: Good until cancelled
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