USD/MXN drops below 18.8000 on risk appetite, offered US Dollar ahead of the FOMC


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  • The Mexican Peso appreciates against the US Dollar ahead of the FOMC’s meeting.
  • An upbeat sentiment in the financial markets was one of the main reasons the USD/MXN fell.
  • The US Treasury bond yield recovery began to reflect a 25 bps rate hike by the Fed.
  • USD/MXN Price Analysis: Could resume downwards if it conquers 18.60; otherwise, upside risks remain.

The Mexican Peso (MXN) strengthens against the US Dollar (USD) courtesy of an upbeat sentiment amongst investors after Wall Street’s three major indices opened with gains. Therefore, the USD/MXN pair extended its losses below Monday’s low of 18.7857, though the 50-day EMA at 18.6820 capped the US Dollar losses. At the time of writing, the USD/MXN is trading at 18.7673, down 0.24%.

USD/MXN drops on risk-appetite, traders eyeing Fed’s decision

Sentiment remains upbeat. The financial markets narrative changed from inflation to a banking and credit crisis after the failure of two banks in the United States and another at the brisk of default. That has shifted global central banks’ interest rate increases expectations, with traders foreseeing that the Fed could cut rates in the year.

Money market futures expect the Fed to hike 25 bps, with odds at 83.4%, compared to Monday’s 73.8%. Nevertheless, uncertainty around how Fed Chair Jerome Powell’s press conference will go could rock the boat in the financial markets.

Societe Generale economists foresee a 25 bps rate hike

Delving a little deep into Jerome Powell’s press conference, Societe Generale analysts said, “the language around inflation and guidance on interest rates will take precedence over the next 48 hours. The Fed must err on the side of caution, and this means toning down the hawkish narrative until confidence in bank liquidity has been restored. SG economists forecast a +25bp hike, while the market is pricing in nearly 26% probability of a pause.”

Given the backdrop, the USD/MXN might consolidate around current exchange rates. The lack of economic data from Mexico would keep traders leaning into the dynamics of the US Dollar.

The US Dollar Index continues to edge lower, down 0.17%, at 103.132. US Treasury bond yields responded to expectations for a rate hike, with 2s and 10s up 16 and 9 bps each, at 4.148% and 3.579%, respectively.

Of late, Existing Home Sales in the United States in February rose 14.5% MoM, above estimates of 5%, the biggest increase since July 2020, and finished one full year of declines in sales.

USD/MXN Technical analysis

After failing to hold to gains above 19.0000, the USD/MXN resumed its downtrend, clearing the 100-day Exponential Moving Average (EMA) support at 18.9846. However, it should be said that the USD/MXN moved from trading within the low 18.00s to 18.10s towards the 18.60-18.90s area. Oscillators like the Relative Strength Index (RSI) and the Rate of Change (RoC) are still bullish, but RSI’s slope shifted downwards, suggesting that buying pressure is waning.

If the USD/MXN resumes upwards, the first resistance would be the 100-day EMA at 18.9848, followed by the $19.00. A breach of the latter will expose the weekly high at 19.2327. for a bearish resumption, the USD/MXN needs to crack $18.60, so sellers could have a chance to test the 20-day EMA  at 18.5635 before diving toward $18.00.

USD/MXN Daily chart

USD/MXN

Overview
Today last price 18.7468
Today Daily Change -0.0763
Today Daily Change % -0.41
Today daily open 18.8231
 
Trends
Daily SMA20 18.4166
Daily SMA50 18.6273
Daily SMA100 19.0605
Daily SMA200 19.6164
 
Levels
Previous Daily High 19.2324
Previous Daily Low 18.7879
Previous Weekly High 19.1812
Previous Weekly Low 18.2397
Previous Monthly High 19.2901
Previous Monthly Low 18.2954
Daily Fibonacci 38.2% 18.9577
Daily Fibonacci 61.8% 19.0626
Daily Pivot Point S1 18.6632
Daily Pivot Point S2 18.5033
Daily Pivot Point S3 18.2187
Daily Pivot Point R1 19.1077
Daily Pivot Point R2 19.3923
Daily Pivot Point R3 19.5522

 

 

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