USD/MXN steady around 20.30 on a quiet Monday, bullish outlook
|- Calm market on Monday amid US holiday.
- Emerging market currencies remain under pressure on recession fears and higher interest rates.
- USD/MXN firm while above 20.20 looking at 20.45.
The USD/MXN is practically unchanged on Monday, hovering slightly below 20.30, holding onto last week's gains. With US markets closed, price action will likely remain limited.
The bias in USD/MXN continues to point to the upside. While above 20.20, a test of 20.45, the next strong barrier seems likely. Above the next resistance is located at 20.70. On the flip side under 20.20, the strong support lies at 20.05, followed by an uptrend line at 19.90.
Week ahead
Risk sentiment will likely continue to be the key driver in USD/MXN. Key events for the week will be the release of the FOMC minutes on Wednesday, the ADP employment report on Thursday and the Non-farm payroll on Friday.
Mexico will report June inflation on Thursday. The annual rate is seen near 8%, reaching the highest since early 2001, well above Banxico’s 2-4% target. “The central bank just hiked rates 75 bp to 7.75% on June 23 and signaled more hikes were needed. Next policy meeting is August 11 and another 75 bp hike seems likely. Looking ahead, the swaps market is pricing in 200 bp of tightening over the next 6 months that would see the policy rate peak near 9.75%. Banco de Mexico minutes will also be released Thursday”, explained analysts at Brown Brothers Harriman.
USD/MXN daily chart
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