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USDMXN Hits Five-Month Lows Ahead of Banxico Decision on Thursday

USDMXN is under selling pressure for the fifth consecutive session as the pair gives up 0.02% at 18.9295 making fresh five-month lows.

On the data front, the United States Housing Starts Change came down to 3.2% in November from the previous 3.8%. The Building Permits Change dropped from the previous 5% to 1.4%. Building Permits came in at 1.482M above forecasts of 1.41M in November.

The next policy meeting of the Bank of Mexico in on Thursday. Analysts expect a 25 basis points interest rate cut. The recent strength in the Mexican peso and the latest inflation data, leave the room of a larger rate cut. At the last policy meeting, two out of the five voting Board members voted for 50 basis points cut.

Last week Fed kept rates unchanged, as was widely expected by markets after three consecutive 25bp rate cuts. The dot plot outlook for 2020 suggests that the monetary policy will remain unchanged.

Read our Best Trading Ideas for 2020.

USDMXN Technical Levels to Watch

On the technical analysis side, the outlook for USDMXN is clearly bearish as the pair trades below all major moving averages. The pair registered losses in the ten out of the eleven trading sessions and have reached oversold level.

On the downside, immediate support for USDMXN pair stands at 18.9107 today’s low, while a break below will meet the next support at 18.7930 the low from July 31st. Sellers must be cautious as the pair have reached oversold levels and a sharp rebound can’t be ruled out.

On the other hand, immediate resistance for the pair stands at 18,9656 today’s high; while more offers will emerge at 19.2559 the 50-day moving average. A break above that level will give bulls the upper hand, and a move up to 19.4454 might be the next target.