The USDMXN pair declined today as the market reacted to the upbeat crude oil prices and better-than-expected inflation data.
Crude oil price boosts Mexican peso
Mexico is one of the third-biggest crude oil producers in North America after the United States and Canada. The country produces more than 3 million barrels of oil every day and exports most of it. As a result, the Mexican peso is highly sensitive to the price of oil.
Today, crude oil price was upbeat, with the West Texas Intermediate (WTI) rising by more than 10%. Brent, the global benchmark rose by more than 6% as the market remained optimistic about the global recovery. As a result, the stock price of oil-related companies like Shell and Chevron rose while energy currency pairs like USD/MXN and USD/NOK declined.
Mexico inflation data better than expected
The USD/MXN pair also declined because of the CPI data from Mexico. Numbers from the Mexican bureau of statistics showed that the headline consumer prices dropped by 1.01% in April. This was a deep decline from the previous decline of -0.05%. Similarly, the inflation rose by 2.15% on a year on year basis. Most analysts polled by Bloomberg were expecting the CPI to jump by 2.13%. At the same time, the core CPI, which excludes the volatile food and energy products rose by 0.36% from the previous 0.29%.
According to the bureau, the prices of agricultural products declined by 0.79% in April while energy prices fell by 8.97% mostly because of the low oil prices.
At the same time, data from the bureau showed that the national index of precision rose at a monthly rate of 1.44%. It rose by 3.07% on an annual basis. This growth was mostly because of a 2.2% rise in companies in the secondary activities. It was followed by a 0.46% increase of groups in the primary activities and 0.23% for those in the tertiary activities.
The USDMXN pair declined to 24.000 in reaction to the inflation data and crude oil prices. On a hourly chart, this price is slightly above the 23.6% Fibonacci retracement level of 24.0380. Also, we see that the pair has been on a strong downward trend since peaking at 24.5332 earlier today. Therefore, I expect the bearish trend to continue in the near term as bears attempt to test the 23.6% Fib level at 24.0380.
On the flip side, a move above the 50% retracement level of 24.4560 will invalidate this prediction because it will show that there are still more buyers in the market.