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MEXICO: MXNJPY Thrust Back into Focus, Breaks to 8-Week Lows

MEXICO
EM BulletMexicoBulletEmerging Market NewsNorth America
  • After printing a fresh post-election high at 20.8313 on Tuesday, USDMXN has spent today’s session oscillating around 20.70, consolidating a 1.25% advance on the week. With the focus more on the yen overnight, peso weakness is still prominent here with MXNJPY falling 3.65% across the past two sessions to the lowest level since early October.
  • In the process, MXNJPY has broken through a short-term wedge pattern, exacerbating the most recent weakness. This highlights a potential continuation of the trend across Q2, which saw the cross fall by as much as 26%.
  • Price action is bolstered by not only the sensitivity of the Mexican peso to tariff related intentions from the Trump administration but also the expectations for further monetary tightening from the Bank of Japan in December (OIS-markets see a 25bps hike near 65% priced). Furthermore, our overnight desk noted the outcome of the 40-year JGB auction was viewed as disappointing, assisting the renewed yen optimism.
  • Downside targets for the MXNJPY move are well established, namely the 2024 lows at 6.9908. Below here the March 2023 low at 6.7911 and Dec 2022 low at 6.5885 are notable chart points.
  • On the domestic docket, Mex trade balance data is due today, before the release of the latest quarterly inflation report from the central bank. Banxico minutes are also scheduled tomorrow following the dovish tilt to the November rate decision, which saw a unanimous 25bp cut.
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  • After printing a fresh post-election high at 20.8313 on Tuesday, USDMXN has spent today’s session oscillating around 20.70, consolidating a 1.25% advance on the week. With the focus more on the yen overnight, peso weakness is still prominent here with MXNJPY falling 3.65% across the past two sessions to the lowest level since early October.
  • In the process, MXNJPY has broken through a short-term wedge pattern, exacerbating the most recent weakness. This highlights a potential continuation of the trend across Q2, which saw the cross fall by as much as 26%.
  • Price action is bolstered by not only the sensitivity of the Mexican peso to tariff related intentions from the Trump administration but also the expectations for further monetary tightening from the Bank of Japan in December (OIS-markets see a 25bps hike near 65% priced). Furthermore, our overnight desk noted the outcome of the 40-year JGB auction was viewed as disappointing, assisting the renewed yen optimism.
  • Downside targets for the MXNJPY move are well established, namely the 2024 lows at 6.9908. Below here the March 2023 low at 6.7911 and Dec 2022 low at 6.5885 are notable chart points.
  • On the domestic docket, Mex trade balance data is due today, before the release of the latest quarterly inflation report from the central bank. Banxico minutes are also scheduled tomorrow following the dovish tilt to the November rate decision, which saw a unanimous 25bp cut.