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  • US Dollar holds to post-FOMC meeting gains but rally losses momentum.  
  • USD/MXN extends reversal and looks set to challenge 19.20.  

The USD/MXN pair rose further on Thursday amid a stronger US Dollar across the board and lower crude oil prices. The rally of the greenback was the main driver.  

Yesterday after the FOMC meeting, the USD/MXN dropped to 18.78, and then reversed sharply. Today rose further and recently peaked at 19.13, the highest level in a week. The positive outlook offered yesterday by Fed’s Powell, and the latest US economic data supported the dollar.  

As of writing, trades at 19.10, holding far from the critical short-term support of 18.90 and also clearly above the 20-day moving average that stands at 18.91. A daily close above 19.10 would point to more gains and a test of the next resistance at 19.20. A break above would target 19.28/30.  

Mexican PMI rises marginally  

The Markit PMI report was released today and showed that operating conditions in the Mexican manufacturing industry improved marginally at the start of the second quarter, as growth of new business and stocks of purchases counteracted sustained decreases in output and employment. The seasonally adjusted IHS Markit Mexico Manufacturing posted above the no-change mark of 50.0 in April, rising from 49.8 in March to 50.1.  

Pollyanna De Lima, Principal Economist at IHS Markit said: “Manufacturing sector conditions in Mexico remained challenging in April, as evidenced by further declines in production, input purchasing and employment. The only positive takeaways from the latest set of PMI results came from the new orders and future expectations indices.” Added that sales grew at the start of the second quarter, after failing to expand in March. “The rise was only marginal, however, and centred on the domestic market. Parallel to this, new work from overseas contracted for the first time in over a year.“

According to her, subdued demand conditions in recent months continued to weigh on firms’ pricing power, with factory gate charges broadly unchanged in spite of a pick-up in input cost inflation.