USD/MXN hits fresh monthly lows, closer to 19.00

The USD/MXN pair dropped on Friday to 19.02, the lowest levels since late July and then bounced modestly to the upside, rising back above 19.05. The pair continues to move with a bearish trend, and now closer to a critical dynamic support and the 19.00 area. 

The Mexican Peso received some support from the improvement in risk sentiment across markets and global monetary policy expectations. Also technical factors added to the negative tone around USD/MXN. 

Now the pair is standing a few pips above a long term bullish trendline (19.05) and the 19.00 area. A consolidation below would likely clear the way to more losses. The current area also offers upside risks as a rebound seems possible after falling during four consecutive weeks. 

Week ahead

The key event next week will be the Federal Reserve meeting and there is also the US official employment report. Market consensus points to a rate cut. It would be the third in-a-row. If the FOMC acts as expected, then the Bank of Mexico in two weeks will most likely also cut rates. 

Headlines about the US/China trade talks are likely to have an impact across markets. In Latin American another busy week is expected, following presidential elections in Argentina and Uruguay and tensions in Chile, Ecuador and Bolivia. 

In Mexico, growth data is due next week. “Economy has come to a standstill in the past few quarters, a slowing in growth that is expected to have extended into Q3. Q3 GDP is seen rising just 0.2% quarter-over-quarter, after zero growth in Q2. High real interest rates in Mexico, along with some slowing in growth in the United States, seem to be weighing on Mexico’s economy”, explained Wells Fargo analysts. They point out o an annual basis GDP is expected to rise 0.5% year-over-year, but that appears to be due to technical factors rather than reflective of any real improvement in the economy.