Mexican Peso remains on the defensive after Mexico’s Industrial Production figures disappointed investors.

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• Mexican Peso remains on the defensive after Mexico’s Industrial Production figures disappointed investors.
• US inflation exceeds forecasts, impacting speculation of dovish US Federal Reserve.
• USD/MXN is volatile in the session as traders digest recent economic data released on both sides of the border.

The Mexican Peso (MXN) extended its losses for a third consecutive day against the US Dollar (USD) on Thursday following a hotter-than-expected inflation report in the United States. Bets that the US Federal would cut rates in March remained largely unchanged at around 61.4%, though the Mexican currency failed to gain traction in early trading on Thursday. The USD/MXN posts minuscule gains of 0.03% and trades at 16.97 after hitting a four-day high.

Mexico’s economic docket featured Industrial Production that missed the mark set by economists, a headwind for the Peso. The US Bureau of Labor Statistics (BLS) revealed that US inflation in December rose above the mark, which could prevent the Fed from easing policy. At the same time, unemployment claims for the last week were lower than expected, indicating the labor market is softening.

The USD/MXN is bearishly biased even though it hit a new weekly high of 17.04, but the exchange rate has fallen below the 17.00 figure even though the Greenback continues to trade higher as shown by the US Dollar Index (DXY).

If buyers fail to lift the exotic pair above the 17.00 figure and achieve a daily close, that would pave the way for further losses. The first key support level would be the January 10 daily low of 16.92, followed by the latest cycle low of 16.78. Further downside is seen at last year’s low of 16.62.

Conversely, if buyers keep the USD/MXN exchange rate above 17.00, that could pave the way to test the 17.20 mark, followed by the 50-day Simple Moving Average (SMA) at 17.22, ahead of challenging the confluence of the 100 and 200-day SMAs at around 17.40.

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