USD/MXN: Peso fades pullback from multi-year high near 17.00 ahead of Mexican data, Fed Minutes

USD/MXN licks its wounds at the lowest levels since December 2015, fading the corrective bounce off the multi-year bottom near 17.05 amid Wednesday’s Asian session. In doing so, the Mexican Peso (MXN) pair traces the market’s cautious mood ahead of the Federal Open Market Committee (FOMC) Minutes for the June meeting when the Fed policymakers announced a pause on the rate hike. Also poking the pair traders is the anxiety ahead of the Mexican Consumer Confidence for June.

Mexican Peso refreshed a multi-year high the previous day as softer US data joined the fears of recession, flagged by the yield curve inversion. Also favoring the USD/MXN bears is the news of record remittances to Mexico.

“Mexico brought in close to $5.7 billion in remittances in May, central bank data showed on Monday, breaking a monthly record that analysts cautioned was softened by the recent strength of the Peso versus the Dollar,” reported Reuters.

Elsewhere, the US markets were closed on Tuesday due to Independence Day but the downbeat prints of the US ISM Manufacturing PMI and S&P Global PMIs for June prod the US Dollar despite its haven status that gained attention amid market fears.

It should be noted that the US two-year Treasury bond yields dropped to 4.85% while the 10-year counterpart fell to 3.78%, before ending Monday’s trading around 4.93% and 3.86% respectively. Following the bond market data, Reuters said that the yield curve briefly inverted to 42-year lows Monday as investors increasingly expect the Fed to raise its benchmark borrowing rates to keep inflation in check.

Not only the recession woes, but the fears of the US-China trade war also should have put a floor under the USD/MXN price at the multi-year low. That said, China announced abrupt controls on exports of some gallium and germanium products, effective from August 1. The dragon nation’s latest retaliation is in reaction to the US curb on AI chips’ shipments to Beijing.

Against this backdrop, the US Dollar Index (DXY) printed a two-day winning streak before ending Tuesday’s North American session near 103.10 whereas the German Bunds rose while Euro Stoxx and FTSE 100 were both down with mild losses.

It’s worth noting that the aforementioned catalysts, namely the Mexican data and the Fed Minutes will be important for the intraday directions amid the return of the full markets, which in turn requires the USD/MXN pair traders to trade wisely.

Technical analysis

Unless providing a daily close beyond the downward-sloping resistance line stretched from June 23, around 17.12 by the press time, not even a short-term recovery is expected for the USD/MXN price.