The pair USDMXN has seen a significant increase of more than 0.80%, with attention from the market concentrated on the upcoming monetary decisions of Banxico and the US Fed.

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• USD/MXN pair surges over 0.80%, with market focus on impending Banxico and US Fed monetary verdicts.

The pair currently trades last at 17.2137.

The previous day high was 17.1724 while the previous day low was 17.061. The daily 38.2% Fib levels comes at 17.1299, expected to provide support. Similarly, the daily 61.8% fib level is at 17.1036, expected to provide support.

The Mexican Peso (MXN) surrenders against the US Dollar (USD) as the USD/MXN trades with gains of more than 0.80% after hitting a daily low of 17.0499 in a week that would feature the Bank of Mexico (Banxico) monetary policy decision. That, alongside Federal Reserve (Fed) Chair testimony at the US Congress, would likely drive the USD/MXN pair direction. At the time of writing, the USD/MXN trades at 17.2119.

The USD/MXN is bolstered by a risk-off impulse, as shown by US equities trading with losses. In the June monetary policy decision, Banxico is expected to keep rates unchanged, as demonstrated by a Reuters poll on Tuesday. Twenty analysts surveyed see the central bank holding rates unchanged at 11.25% for back-to-back meetings. It should be said that the latest Mexico inflation report showed annual CPI coming below the 5.90% foreseen by analysts at 5.84%

Also, comments made by Governor Victoria Rodriguez Ceja and Deputy Governor Jonathan Heath suggest Banxico will keep rates higher for longer. However, no more hikes are expected, with market participants, expecting a rate cut “at least” until the fourth quarter, according to Goldman Sachs Alberto Ramos.

Aside from this, the Fed skipped raising rates during the last week, though its policymakers upwards revised peak rates above the 5.50% threshold, as shown by the dot-plot. The Summary of Economic Projections (SEP) revealed that 12 of 18 Fed board members tweaked their monetary policy expectations, which bolstered the greenback.

Nevertheless, Fed Chair Powell’s press conference downplayed the dot plots, hurting the prospects of the greenback, which gave back most of its earned gains.

Over the weekend, comments by Fed Governor Christopher Waller and Richmond’s Fed Thomas Barkin leaned hawkish, with both favoring additional tightening if needed. The Fed Watch tools portray investors seeing a 72% odds of a 25 bps hike in July, but the swaps markets are not buying the 50 bps increases towards the year-end.

Earlier, the US economic agenda featured Housing Starts jumping to a 13-month high, as shown by May’s data displayed by the US Commerce Department. Housing Starts rose by 21.4% MoM, crushing the prior month’s plunge of -2.9%, while Building Permits expanded by 5.2%, above -1.4% contraction in April.

The Fed Chair Jerome Powell’s testimony at the US Congress on Wednesday and Thursday is expected to keep the press conference tone. USD/MXN traders must be aware of the language used by Powell, particularly on Wednesday. The Bank of Mexico will reveal its monetary policy decision on Thursday at around 19:00 GMT.

The USD/MXN recovery failed to test the 20-day Exponential Moving Average (EMA) at 17.3599 but erased two days of consecutive losses. If USD/MXN achieves a daily close above the June 15 high of 17.2533, that could exacerbate a rally toward the 20-day EMA. A subsequent break of the latter will expose the May 16 swing low support turned resistance at 17.4038, ahead of testing July 2017 lows of 17.4498. Failure to conquer 17.25 on a daily close could pave the way to re-test YTD lows of 17.0219.

Technical Levels: Supports and Resistances

USDMXN currently trading at 17.2162 at the time of writing. Pair opened at 17.0804 and is trading with a change of 0.8 % .

The pair remains strongly bearish on the daily time frame. It trades below the 20 SMA @ 17.4535, 50 SMA 17.7094, 100 SMA @ 18.0832 and 200 SMA @ 18.8332.

The previous day high was 17.1724 while the previous day low was 17.061. The daily 38.2% Fib levels comes at 17.1299, expected to provide support. Similarly, the daily 61.8% fib level is at 17.1036, expected to provide support.

Note the levels of interest below:

• Pivot support is noted at 17.0368, 16.9932, 16.9255
• Pivot resistance is noted at 17.1482, 17.216, 17.2596

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