The USDMXN pair rose slightly as investors waited for the interest rate decision by Banxico. The pair is also reacting to the tumbling crude oil price. As at 09:40 GMT, the USD to MXN pair is trading at 22.7922, which is close to the highest point since June 12.
USDMXN waits for Banxico interest rate decision
The Mexican central bank will be the second institution to deliver its rates decision after the Turkish central bank. With the number of coronavirus cases in the United States rising, most analysts expects that the central bank will slash interest rates by 50 basis points to 5%. The US matters for Mexico because it is its biggest trading partner. Indeed, Mexico exports more than 50% of its goods to the US.
The Mexican central bank has surprised investors for its hawkish view on the economy. These views are demonstrated by the fact that its current rate is above its ten-year average. This is unheard of especially in time of a pandemic. Therefore, analysts still expect that the bank will slash interest rate today and two other times by August this year.
USDMXN rises as crude oil price falls
The USDMXN pair is also reacting to the falling crude oil prices. Brent, the global benchmark has declined by more than 0.30% while West Texas Intermediate (WTI) has fallen by more than 0.47%. As I wrote earlier today, the decline in crude oil price is mostly because of the increasing coronavirus cases and the rising US inventories.
The USDMXN pair will also react to the US GDP and durable goods orders that will be released at 11:30 GMT. Also, it will react to the upcoming retail sales numbers from Mexico, which will be released later today.
The USDMXN pair is trading at 22.7922. On the daily chart, the pair is slightly above the 50-day and 100-day exponential moving averages. The price is also slightly below the 38.2% Fibonacci Retracement level. Also, it has formed a channel, which is boxed below. Therefore, at this stage, the outlook of the USD to MXN pair is neutral. As such, the key levels to watch will be the support at 21.8666 and the resistance level at 23.00.
A break above this support will mean that bears have prevailed, which will see the price fall to the previous low of 21.4800. On the other hand, if the USDMXN pair moves above 23.000, it will mean bulls have prevailed, meaning that it will possibly test the next resistance at 23.50.