USD/MXN down 0.26% on the day; doors opened towards 100-DMA

Currently, USD/MXN is trading at 20.04, down -0.26% or (526)-pips on the day, having posted a daily high at 20.16 and low at 19.96.

The American dollar vs. Mexican peso seems to somewhat 'hold horses' as the greenback recovered 2.58% during the last 3-consecutive trading sessions. Furthermore, the US economic docket aligns ISM Manufacturing PMI, data-driven, and two speeches from FOMC members; Kaplan and Brainard. Hence, after Trump's speech to Congress, market participants seem to expect a 'surprise' rate hike in March and today's releases could deliver that extra boost of confidence dollar bulls craved.

Andrea Jones-Rooy at FiveThirtyEight reported on Mexico's weaker economic outlook if things go south in the US economy, "While the Trump administration may argue that these policies are more about “Making America Great Again” than hurting Mexico, there is a reason for concern that they may also hurt us. One risk is that the policies themselves could damage the American economy, for example, through higher consumer prices and reduced trade."

Although, President Trump had no time to elaborate on 'border tax adjustments' that should not be considered as the end of the topic. Evidently, markets support the US dollar as 10yr yields recovered, however, without further details and actionable steps promises are just that; words in the wind.

Fed looking all set to hike rates in March – BBH

Historical data available for traders and investors indicates during the last 9-weeks that USD/MXN, a commodity-linked and exotic currency, had the best trading day at +1.83% (Jan.10) or 3983-pips, and the worst at -2.22% (Jan.25) or (4684)-pips. Furthermore, the US 10yr treasury yields have traded from 2.45% to 2.39%, up +2.55% on the day at 2.45% or +0.0609.

Technical levels to watch

In terms of technical levels, upside barriers are aligned at 20.28 (100-DMA), then at 20.86 (50-DMA) and above that at 21.37 (high Jan.27). While supports are aligned at 19.73 (low Feb.27), later at 19.51 (200-DMA) and below that at 19.32 (low Sep.29).

On the other hand, Stochastic Oscillator (5,3,3) seems to head north, but 'extreme attention' over US Treasuries to avoid a market trap. Therefore, there is evidence to expect more Mexican Peso losses in the near term.

On the medium-term view, if 22.03 (high Jan.15) is in fact, the top during the first semester in 2017, then traders and investors would have allocated risk around the following support levels: 19.72 (low Feb.26), then at 19.46 (low Sep.18), and finally below that at 19.19 (short-term 50% Fib).

On the other hand, upside barriers are aligned at 19.87 (short-term 61.8% Fib), later at 20.20 (low Feb.12) and above that at 20.54 (high Feb.12).

US: Expect a sixth consecutive increase in the ISM manufacturing index in February – BMO CM