USD/MXN drops sharply toward 19.60 as US Dollar tumbles

US Dollar plummets following the release of US inflation data.
Mexican Peso has the best day in months versus US Dollar.
USD/MXN back under 19.80 ahead of the Fed and Banxico.

Matías Salord FXStreet

The USD/MXN is falling sharply on Tuesday amid risk appetite and a weaker US Dollar across the board. The pair reversed sharply from monthly highs after the release of US inflation numbers.

The US Consumer Price Index rose below expectation in November and triggered a rally in Treasuries and sent the Dollar sharply lower. Attention now turns to the FOMC meeting. On Wednesday, the Federal Reserve will announce its decision on monetary policy. A 50 bps rate hike is expected.

The Bank of Mexico meets Thursday. Also a 50 bp rate hike to 10.5% is expected. “At the last policy meeting November 10, the bank hiked rates 75 bp to 10.0%. The vote was 4-1, with Deputy Governor Esquivel voting for a smaller 50 bp move. The bank said that the magnitude of future hikes will be decided the circumstances, suggesting greater data-dependence. Since then, headline inflation came in lower at 7.80% y/y in November, but core continues to accelerate to new highs. The swaps market is pricing in a policy rate peak near 10.75%”, explained analysts at Brown Brothers Harriman.

USD/MXN faces strong resistance near 19.80

The rally of the USD/MXN from the lowest level in years near 19.00 peaked on Monday at 19.92. It then started to pullback being unable to consolidate above the 19.80 key area and also rejected from above the 100-day Simple Moving Average (currently at 19.88).

A consolidation between 19.60 and 19.80 seems likely for now. A break under 19.60 should strengthen the Mexican Peso that could go toward the 20-day SMA at 19.47.

Technical levels

USD/MXN

Overview
Today last price	19.6692
Today Daily Change	-0.1885
Today Daily Change %	-0.95
Today daily open	19.8577

Trends
Daily SMA20	19.4681
Daily SMA50	19.6861
Daily SMA100	19.9018
Daily SMA200	20.0503

Levels
Previous Daily High	19.9181
Previous Daily Low	19.731
Previous Weekly High	19.8648
Previous Weekly Low	19.3482
Previous Monthly High	19.8281
Previous Monthly Low	19.0402
Daily Fibonacci 38.2%	19.8466
Daily Fibonacci 61.8%	19.8025
Daily Pivot Point S1	19.7531
Daily Pivot Point S2	19.6485
Daily Pivot Point S3	19.566
Daily Pivot Point R1	19.9402
Daily Pivot Point R2	20.0227
Daily Pivot Point R3	20.1272

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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