Towards the beginning of April USDMXN found support into the 12.96/9700 level, which saw the 38.2% retracement of the 2013-14 advance & the prior 2014 low, and has since rebounded to settle comfortably back above the psychological 13.0000 level – This has also been aided by poor economic data out of Mexico:
- March CPI: 3.76% vs exp. 3.79% y/y, but down significantly from 4.23% in Feb.
- Feb. Industrial Production: +0.7% vs. consensus +1.0% y/y
- March Unemployment rate: 4.80% vs. expected 4.46%
- Feb. Retail Sales: -1.7% vs. consensus +0.4% y/y
Tomorrow the Bank of Mexico (Banxico) has their interest rate decision at 10am ET and we (as well as the market) anticipate the bank will keep rates unchanged at 3.50%, largely due to underwhelming GDP growth and falling inflation. As a result, tomorrow’s decision may come off as being more pro-growth (dovish) and thus could lead to a move higher in USDMXN.
Confluence of technical resistance at 13.15/1600:
- Trendline resistance
- 50-day sma
- 100-day sma
Interestingly, daily RSI has already broken above corresponding trendline resistance in advance to price (leading indicator?). Accordingly, we may not only see the aforementioned 13.1500 level tested, but perhaps even broken over the coming sessions. Conversely, should USDMXN break back below the newly created 2014 low at 12.9420, it would negate this near-term bullish bias.
Chart Source: Forex Charts by eSignal
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