- Mexican peso continues to move higher versus US dollar supported by NAFTA optimism and higher crude oil prices.
- Greenback weakened across the board ahead of Fed’s meeting and jobs data.
The Mexican peso rose again versus the US dollar as it continues to move higher. It reached fresh 3-month highs and it was about to end near daily highs. The combination of a weaker greenback, optimism about NAFTA negotiations and higher crude oil prices pushed USD/MXN to the downside.
Wilbur Ross, US Commerce Secretary mentioned today that negotiations with Mexico regarding NAFTA were going well and added there’s a pretty good chance of a quick deal. Also, other US officials on Friday and during the weekend spoke about the possibility of a deal during autumn.
The pair rose toward 18.65 earlier today but turned to the downside and dropped to 18.49, hitting the lowest level since April 20. It rebound modestly and near the end of the day was trading at 18.52, 2% below the level it closed last Monday. The negative tone was intact.
The key support area between 18.45/50 was being tested. A consolidation below would open the doors for an extension of the decline with a potential target at 18.30. On the upside, resistance was seen at 18.65 followed by 18.80 and 18.90 (downtrend line).
Data and events ahead
“Mexico reports Q2 GDP Tuesday, which is expected to grow 2.9% y/y vs. 1.3% in Q1. Banco de Mexico meets Thursday and is expected to keep rates steady at 7.75%. Inflation is picking up after decelerating earlier this year. With the peso firm, Banxico can hold off on rate hikes near-term but the recent rise in price pressures needs to be watched closely”, wrote analyst at BBH.
In the US, events over the week include the FOMC meeting (state mt to be released on Wednesday at 18:00 GMT) and the official employment report on Friday.
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