Mexican Peso depreciates as broader market caution remains before Fed decision.

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• Mexican Peso depreciates as broader market caution remains before Fed decision.
• US employment data and a low Employment Cost Index shows the labor market is cooling.
• USD/MXN traders eye FOMC, which is expected to adopt a neutral interest rate stance.

The Mexican Peso (MXN) weakens against the US Dollar (USD) on Wednesday and posts losses of more than 0.10% as risk aversion drives the financial markets ahead of the US Federal Reserve’s (Fed) monetary policy decision. Mexico’s economic docket is empty. In the United States, employment data was soft, and the Employment Cost Index (ECI) sought by Fed officials as a measure of inflation in wages dipped below estimates. The USD/MXN trades at 17.16 after hitting a daily low of 17.09.

Wall Street trades with losses as investors prepare for the Fed. The US central bank is expected to keep rates at the 5.25%-5.50% range with the tone of the statement remaining neutral. Following that, Fed Chairman Jerome Powell’s press conference is expected to strike a more balanced approach, recalling last December’s ultra-dovish conference.

The USD/MXN trades range-bound, slightly tilted to the upside, capped by key Simple Moving Averages (SMAs), with the 50-day SMA at 17.13 and the 200-day SMA at 17.33. Although it appears closer to the 50-day SMA, market sentiment could lift the exchange rate to the 200-day SMA at 17.33, which, once cleared, could open the door for higher prices. Next resistance would be the 100-day SMA at 17.41, followed by the December 9 high at 17.56. Last of all sits the May 23 high from last year at 17.99.

On the flip side, if the USD/MXN exchange rate drops below the 50-day SMA at 17.13, that will expose the January 22 low at 17.05, followed by the 17.00 psychological level.

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