USD/MXN rebounds sharply from weekly lows toward 19.20 after Fed cut rates
- US Dollar strengthens after FOMC statement and Fed’s Chair Powell press conference.
- Mexican peso reverses sharply and turns negative versus USD, outperforms other EM currencies.
The USD/MXN was trading below 19.00, at the lowest level in twelve days and looking at the 18.90 critical support but reversed sharply and jumped to 19.19, hitting a 1-week high. From the top pulled back and it is hovering around 19.10, modestly higher for the day.
The move higher was driven by a rally of the US Dollar across the board. The Federal Reserve cut the Fed Funds rate by 25 basis points as expected. Two members dissented and voted for no cut. There was no explicit reference to providing further accommodation, neither from the statement nor Powell. In the statement, the Fed said it will act as appropriate to sustain the expansion while Chair Powell said the cut is a mid-cycle adjustment to policy.
Equity prices dropped after Powell’s remarks and the greenback jumped. Despite losing ground versus the US Dollar, the Mexican peso outperformed most of the EM currencies. Earlier today, it was reported the Mexican economy grew 0.1% rate during the second quarter, avoiding a technical recession.
Technical levels
If the USD/MXN manages to hold on top of 19.10, the short-term bias would point to the upside. The next resistance is seen at 19.20 (last week high) and above attention would turn to the critical 19.30. A close above the last one would clear the way for a rally to 19.45/50.
A failure above 19.10, would put USD/MXN back in the 19.00/19.10 range. Under 19.00, the next support lies at 18.90 that protects the 2019 low at 18.74.
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.
