The Mexican Peso (MXN) experienced mixed performance on Wednesday, weakening against the US Dollar (USD) due to stronger-than-expected US Building Permits data, while strengthening against the Euro (EUR) and British Pound (GBP) as European inflation remains stubbornly high.
Market Drivers and Outlook
The MXN initially gained against the USD following Fed Governor Adriana Kugler’s speech hinting at potential rate cuts later this year. However, the US Dollar rebounded after positive US Building Permits data, signaling a stronger economic outlook for the US.
Meanwhile, both the UK and Eurozone reported persistently high inflation figures, raising doubts about the likelihood of imminent rate cuts by the Bank of England (BoE) and European Central Bank (ECB). This boosted the EUR and GBP against the MXN.
The Mexican Peso’s outlook remains uncertain, with mixed signals from global economic data and central bank policies. Upcoming Mexican economic data releases, such as the May growth figures due on July 22nd, could provide further direction for the currency.
USD/MXN Technical Analysis: Potential Reversal Under Scrutiny
The USD/MXN pair found support at the 50-day Simple Moving Average (SMA), potentially signaling a reversal from its recent downtrend. The formation of a two-day reversal pattern and a potential Measured Move (MM) completion further support this possibility.
However, the short-term trend remains bearish, and a decisive break below the 50-day SMA could trigger further declines towards the 200-day SMA and a significant trendline support at 17.27.
Key Points:
- MXN weakens against USD due to positive US economic data, strengthens against EUR and GBP on persistent European inflation.
- Fed rate cut expectations remain, but timing is uncertain.
- BoE and ECB rate cut prospects dim as inflation remains high.
- USD/MXN technicals hint at a potential reversal, but the bearish trend persists.