The US dollar to Mexican peso exchange rate, represented as USDMXN at 17.7429, has sharply increased to reach new highs within its current cycle. This was driven by risk aversion in the market and the strength of the US dollar.

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• USD/MXN rallies to new cycle highs, post 17.8000 on risk aversion, strong USD.

The pair currently trades last at 17.7429.

The previous day high was 17.5675 while the previous day low was 17.3642. The daily 38.2% Fib levels comes at 17.4898, expected to provide support. Similarly, the daily 61.8% fib level is at 17.4419, expected to provide support.

The Mexican Peso (MXN) continues to weaken against the US Dollar (USD) during the North American session after hitting a daily low of 17.4748. Broad USD strength on risk aversion, due to some factors, underpins the USD/MXN, which is trading at 17.7837, though it has hit a new cycle high at 17.8161.

Sentiment remains sour, as portrayed by US equities drifting lower. A partial shutdown of the US government looms, while hawkish rhetoric by the Federal Reserve continues to underpin US Treasury bond yields and, consequently, the Greenback.

The US 10-year benchmark note rate sits above 4.63% and has gained nine and a half basis points so far in the session, while the US Dollar Index (DXY), which tracks the performance of a basket of six currencies versus the Greenback, climbs to yearly highs of 106.82, with buyers eyeing November 30, 2022, high of 107.19.

Minnesota’s Fed President Neil Kashkari commented the risk of interest rates might have to go higher lurks while adding that consumer spending remains robust. Kashkari said that although there is progress in inflation, he remains unsure if the Fed is restrictive enough.

On the data front, the US Department of Commerce showed that Durable Goods Orders for August rose 0.2% MoM, exceeding estimates and the prior month’s -5.6% plunge. Excluding Transports, orders climbed 0.4% MoM, above projections and July’s 0.1% increase.

On the Mexican front, the Trade Balance in August posted a deficit of -1.377 billion dollars in non-adjusted terms, while seasonally adjusted posted a $131 million trade deficit, compared to July’s surplus of $532 million.

Aside from this, the Bank of Mexico (Banxico) will release its monetary policy decision on Thursday, in which the central bank is expected to hold rates unchanged at 11.25%, according to a Reuters poll of 20 analysts. The central bank has kept rates at 11.25% since March 2023 while inflation decelerates. The latest Consumer Price Index (CPI) report for the first half of September witnessed a drop to 4.4%, its lowest since March 2021.

The daily chart shows the pair has extended its gains to a new cycle high, which could open the door for further upside, but buyers must reclaim the 200-day moving average (DMA) at 17.8511, which could pave the way for a test of 18.0000. A breach of those two levels would put into play a rally towards the April 5 swing high at 18.4010, followed by the March 24 daily high at 18.7968.

Technical Levels: Supports and Resistances

USDMXN currently trading at 17.8026 at the time of writing. Pair opened at 17.5435 and is trading with a change of 1.48 % .

The pair is trading above its 20 Daily moving average @ 17.2387, above its 50 Daily moving average @ 17.0675 , above its 100 Daily moving average @ 17.1893 and below its 200 Daily moving average @ 17.8688

The previous day high was 17.5675 while the previous day low was 17.3642. The daily 38.2% Fib levels comes at 17.4898, expected to provide support. Similarly, the daily 61.8% fib level is at 17.4419, expected to provide support.

Note the levels of interest below:

• Pivot support is noted at 17.416, 17.2885, 17.2128
• Pivot resistance is noted at 17.6192, 17.695, 17.8225

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