The USD/MXN pair is down 0.15% this Friday as the US Dollar continues to feel the pinch from the double hammer blow provided by the cooler CPI and PPI data. Wednesday’s surprise easing in the US consumer price indices was followed on Thursday by lower-than-expected producer inflation figures, ensuring that the US Dollar would end the week firmly on the back foot.
Rising crude oil prices over the last three trading sessions have also played into the commodity-linked Peso’s hands to the US dollar’s detriment. However, the breakdown move is 75% completed, thanks to the USD-negative fundamentals. As far as the USD/MXN is concerned, this is good news for Peso bulls hoping that the rising wedge pattern plays out as expected.
There is still a final fundamental trigger for the pair, and it comes in the form of the Preliminary University of Michigan Consumer Sentiment report. The market consensus is for the UoM Consumer Sentiment Index to have risen slightly from 51.5 to 52.5. A better-than-expected reading caps the decline in the USD/MXN. Still, a reading which meets expectations or is worse than expected would hasten the USD/MXN’s march to its expected completion point at 19.50493, following the pattern’s breakdown expectation.
The call on the USD/MXN pair, as shown on the chart, was that the rising wedge would break down, resulting in a correction on the pair. This has played out as analyzed, and the breakdown of the 20.07431 support has opened the door toward the 19.82552 support level (24 June low).
A breakdown of this price mark clears the way toward the 19.50493 support. This is where the lows of 31 May and 3 June reside. As a result, the downside move may come to a pitstop at 19.69850, where the previous highs of 2 June and 8 June are located.
Conversely, any recovery may become new opportunities to go short. The outlook is rendered invalid if the bulls eventually force a recovery that takes out the resistance targets above the 21.06422 barrier (11 March and 14 July highs). To achieve this, a sequence of resistance barriers at 20.19249, 20.48769 (12 May and 4 August highs), 20.69617 (15 June high) and the 20.79493 barrier formed by the highs of 6 July and 3 August are the obstacles that the bulls must take out.