USD/MXN rises to test 19.25, critical short-term resistance

  • Stronger US Dollar boosts USD/MXN to the upper limit of the current range. 
  • Pair up for the second-day in-a-row, bullish bias but capped by 19.25. 

The USD/MXN pair is rising for the second-day in-a-row on Tuesday and it continues to trade in the 19.00/19.25 range, but now closer to the upper limit. 

Earlier today, the pair fell to 19.10 amid an improvement in market sentiment on the back US-China trade deal negotiations. Later, the Greenback gained momentum amid higher US yields and then by upbeat US data. USD/MXN jumped to 19.23, just two cents below last week highs. 

As of writing, trades at 19.20, with a bullish bias, still limited by the 19.25 strong resistance area. On the flip side, the critical support continues to be 19.00/05; a break lower would open the door for a test of the 2019 low at 18.74 .

Inflation data and Banxico 

On Thursday, inflation data is due in Mexico. Analysts at BBVA expect an increase in the Consumer Price Index of 0.51% (MoM) in October and 2.99% from a year ago. The report will be relevant for the Bank of Mexico Governing Council. Next week they will likely reduce the key interest rate by 25 or 50bp. 

The slowdown in inflation, a relatively steady Mexican Peso and the easing in policy from the Federal Reserve, allows a more aggressive rate cut cycle in Mexico.  “We continue to expect Banxico to ease its monetary policy stance somewhat faster than market expectations. We expect the policy rate to reach 7.0% by year-end and 6.0% by year-end 2020, reaching neutral levels in real terms in the summer of next year. We think that an easing stance would be more appropriate but the Board will likely remain cautious”, added BBVA analysts. 


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