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MEXICO: USDMXN Prints Four-Week Low Below 20.10, Tests 50-day EMA

MEXICO
EM BulletMexicoBulletEmerging Market NewsNorth America
  • Despite a brief blip higher to 20.29 on Tuesday, USDMXN has reversed lower and has printed a fresh four-week low in recent trade below 20.10. Spot briefly tested the 50-day EMA support, which intersects today at 20.0762, and is the first test of the average since October 14. We have not had a daily close below this average since mid-July.
  • Despite the bullish trend structure for USDMXN overall, attention has been on the Nov 6 pullback and the subsequent reversal lower. This continues to highlight a possible short-term top and therefore a bearish threat. A clear breach of the 50-day average would undermine the bullish theme and signal potential for a deeper retracement towards 19.7618 initially, the Nov 7 low.
  • CIBC have noted that Banxico’s forward guidance will dictate the MXN reaction into early 2025. As they see increasing odds of dovish hints in the announcement (i.e. downward trajectory of core CPI, stable inflation expectations, and deceleration of GDP growth), CIBC expect USD/MXN to resume its upward path towards 20.40-20.50 into the end of the year, and prefer buying dips between 20.10-20.20.
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  • Despite a brief blip higher to 20.29 on Tuesday, USDMXN has reversed lower and has printed a fresh four-week low in recent trade below 20.10. Spot briefly tested the 50-day EMA support, which intersects today at 20.0762, and is the first test of the average since October 14. We have not had a daily close below this average since mid-July.
  • Despite the bullish trend structure for USDMXN overall, attention has been on the Nov 6 pullback and the subsequent reversal lower. This continues to highlight a possible short-term top and therefore a bearish threat. A clear breach of the 50-day average would undermine the bullish theme and signal potential for a deeper retracement towards 19.7618 initially, the Nov 7 low.
  • CIBC have noted that Banxico’s forward guidance will dictate the MXN reaction into early 2025. As they see increasing odds of dovish hints in the announcement (i.e. downward trajectory of core CPI, stable inflation expectations, and deceleration of GDP growth), CIBC expect USD/MXN to resume its upward path towards 20.40-20.50 into the end of the year, and prefer buying dips between 20.10-20.20.