Mexican Peso gets hit by sentiment shifting, down 0.13% against Greenback.

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• Mexican Peso gets hit by sentiment shifting, down 0.13% against Greenback.
• Mexico’s economy continues to slow down amid the ongoing disinflation process.
• Expectations that Banxico would begin easy monetary policy in Q1 2024 could pave the way for further upside in USD/MXN.

The Mexican Peso (MXN) made a U-turn after posting solid gains versus the US Dollar (USD) on Friday, weakening amid thin liquidity conditions in the observance of Martin Luther King (MLK) day in the United States (US). The emerging market currency is soft despite interest rate traders expecting the US Federal Reserve (Fed) to cut rates by 170 basis points in 2024, undermining the prospects of the buck. Nevertheless, the USD/MXN exchanges hands at 16.90 on Monday, gaining 0.23%.

Risk aversion is taking its toll on European stocks, bolstering the Greenback (USD), a headwind for the Mexican currency. Even though the Peso continues to edge lower, futures positions on the Mexican Peso show investors had remained long for the last 44 weeks, according to data revealed by the Chicago Board of Trade (CBOT). Net speculative contracts rose by 88,439 longs, -0.7% less than last week’s 89,100.

Despite that, the USD/MXN had resumed its uptrend on speculation that the Bank of Mexico (Banxico) will begin easing its monetary policy. However, the latest inflation report could prevent them from relaxing monetary conditions.

The USD/MXN remains downward biased, but today’s bullish impulse can open the door to challenging the 17.00 figure. A decisive breach of the latter would expose the 50-day Simple Moving Average (SMA) at 17.19, followed by the confluence of the 100 and 200-day SMAs at around 17.38/40.

On the flip side, if sellers drag prices toward last Friday’s low of 16.82, that could open the door for further downside. Once cleared, the next support would be the January 8 low of 16.78, followed by the August 28 cycle low of 16.69, ahead of last year’s low of 16.62.

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