USDMXN Under Pressure On Stronger Mexican Industrial Output
USDMXN trades lower for the second consecutive day in a row after stronger Industrial output from Mexico. The Mexico Industrial Output for the month of December came in at -0.3% topping expectations of -1.5%. The yearly Industrial Output reported at -1% also above the forecasts of -1.8%.
Fed’s Powell said that the current stance of monetary policy would likely remain appropriate as far as incoming economic data about the economy remains consistent with Fed’s outlook. Powell also said that the Fed is ‘closely monitoring’ the coronavirus outbreak. He sees inflation to gradually moving towards the 2% target. Fed looking to slowly move away from the active use of repos. Powell also warned that the low-interest-rate environment may limit the ability of central banks to reduce policy rates enough to support the economy during a downturn.
The central bank of Mexico cut the benchmark interest rates for the fourth time by 25 bps to 7.25% on December 19th. MXN has appreciated against the US dollar since September 2019 amid the signing of the Phase One trade deal between China and USA. While the robust economic data from the USA the last two weeks failed to reverse the downtrend.
USDMXN hovers close to 15-month lows as all the attempts for higher levels meet severe selling pressure. The technical outlook is clearly bearish for USDMXN. The descending channel started back in September drives the pair lower targeting 18.50.
On the downside, immediate support will be met at 18.6493 the daily low. Next support level to watch is at 18.5664 the low from February 6th. A break below might pave the way for a move down to 18.4116 the low from August 7 2018.
On the upside, initial resistance for USDMXN will be met at 18,7135 today’s high. The next obstacle on the upside stands at 18.8272 the high from February 10th. If USDMXN breaches that level the next supply zone stands at 18.9083 the 50-day moving average.