Supply: IG Charts Predominant USD/MXN Speaking Factors:Mexico suffers worst financial contraction in historical pastGreenback we
Supply: IG Charts
Predominant USD/MXN Speaking Factors:
- Mexico suffers worst financial contraction in historical past
- Greenback weak spot continues
- USD/MXN restricted by downward resistance
USD/MXN continues in considerably of a uneven value motion, not fairly discovering a secure path, resembling what is going on all over the world proper now.
The rise in new instances of coronavirus has taken its toll on the Mexican peso, which, together with different rising currencies, is very linked to financial development. Whereas the greenback has had a troublesome few weeks, even having its function because the world’s reserve forex questioned, the U.S. forex remains to be the place many traders flip to when confronted with an unsure outlook.
This weak spot has triggered the USD/MXN to retreat from its late June peak, dropping from 23.20 to 21.85 in Wednesday‘s session. However once more plainly issues have turned in opposition to the peso, after Mexico suffered its worst financial contraction in historical past.
The Gross Home Product (GDP) of Mexico recorded a contraction of 18.9% within the second quarter of the 12 months over the identical interval final 12 months, which is the worst studying of the info in historical past within the context of the coronavirus pandemic.
Including much more bullish help for USD/MXN, the US information additionally raises considerations, particularly after the Federal Reserve acknowledged that the way forward for the financial system stays very unsure, with the financial system nonetheless going by way of a really darkish interval whereas ready for progress on the virus.
Wanting forward, risk-sentiment is more likely to proceed to be the primary driver for USD/MXN, as coronavirus instances proceed to develop in the US and Latin América. Greenback weak spot is more likely to subside considerably as traders proceed to search for safer returns, though it’s nonetheless removed from being in a very good place.
USD/MXN 4-hour chart (22 Might – 31 July 2020)
From a technical standpoint, the pair continues to development decrease, however appears to be shedding vendor help. On the 4-hour chart we see how the USD/MXN has created a line of downward resistance since July 8, which we might see persevering with to help additional declines if decrease highs are sustained. Up to now the pair has discovered some resistance on the 50-period transferring common, halting advances at 22.22, near the 50% Fibonacci retracement stage that has been in play for a while.
The danger now’s whether or not USD/MXN will be capable to get away of the 21.80 help stage or will it act once more to cease the declines. On the upside, a push above 22.23 might result in one other try to interrupt the downward resistance line, now at 22.50, which could possibly be doable if the greenback amasses extra shopping for help within the coming days.
— Written by Daniela Sabin Hathorn, Market Analyst
Comply with Daniela on Twitter @HathornSabin