USDMXN At Two Month Lows As Crude Oil Price Pare Losses
SDMXN trades lower for the fifth consecutive trading session after the Mexico Retail Sales rose in March to -0.8% from previous -1.1%. The yearly reading for the Retail Sales came in at -1.3% below the expectations of -1%. The Mexico 1st half-month Inflation picked up at 0.3% topping the forecasts of -0.07% in May. The 1st half-month Core Inflation registered in at 0.24%, above the expectations of 0.12%. Consumer prices rose through early May by 2.83%, a level below the Banxico’s target rate which stands at 3% (+/- 1%).
The Mexican peso is getting a boost this week from the rally in crude oil prices as the WTI futures contract have reached $33.5 per barrel while the Brent crude oil is above $35.
Last week, the central bank of Mexico cut the interest rates by 50 basis points to 5.5% as was expected by markets. Banxico said that the risks are to the downside amid the coronavirus outbreak and is open to any further interest rates adjustment as it continues to monitor the coronavirus impact on the economy. Despite the recent rate cuts, the Mexico interest rates remain higher than in other western economies, and many economists now expect the central bank to continue the easing in monetary policy.
USDMXN is 0.30% lower at 22.7952, making fresh two month lows as the correction from historical record levels in early April continues. The short term positive momentum accelerated below the 50-day moving average. The long term outlook remains bullish for the pair as long as the pair trades above the 100-day moving average.
On the downside, now the initial support for USDMXN will be met at 22,7068 today’s low. The next support zone for the pair stands at 22.4500 the low from March 17. The next target on the downside for the bears is at 22.5267 the 100-day moving average.
On the other hand, the immediate resistance for the USDMXN pair stands at 23.1678 the daily high. A break above might drive the price to 23.2871 the high from yesterday’s trading session. In case the USDMXN pair breaks above 23.2871, then the next resistance will be met at 23.7701 the high from May 20.