News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Real Time News
  • It’s important for traders to be familiar with FX spreads as they are the primary cost of trading currencies. Understand a pair's spread here: https://t.co/zEEUHZjVIG https://t.co/f6mraHu6zv
  • Technical analysis of charts aims to identify patterns and market trends by utilizing differing forms of technical chart types and other chart functions. Learn about the top three technical analysis tools here: https://t.co/KDjIjKWitK https://t.co/JMsJPQlQ3j
  • 🇳🇱 Consumer Confidence (SEP) Actual: -5 Previous: -6 https://www.dailyfx.com/economic-calendar#2021-09-22
  • A rough start to the week with the cryptocurrency market a sea of red with losses on either side of -10% a common sight.Get your market update from @nickcawley1 here:https://t.co/AUfuM9t7yw https://t.co/lU6HS7fHwr
  • RT @FxWestwater: Gold, Copper Forecast: XAU Eyes FOMC, Evergrande News Sends Copper Flying Link: https://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/commodities/2021/09/22/Gold-Copper-Forecast-XAU-Eyes-FOMC-Evergrande-News-Sends-Copper-Flying.html?CHID=9&QPID=917708&utm_source=Twitter&utm_medium=Westwater&utm_campaign=twr https://t.co/x2sC…
  • Heads Up:🇳🇱 Consumer Confidence (SEP) due at 04:30 GMT (15min) Previous: -6 https://www.dailyfx.com/economic-calendar#2021-09-22
  • PBoC liquidity injection + reports that Evergrande will make its next onshore bond payment ($35.88-million on 23 Sept) is bolstering risk appetite here. Yet, there is still no word on the $83.53-million offshore bond payment also due Thursday. Over to you now, Jpow & Co. https://t.co/3an0K2d5T1
  • Do you know how to properly Identify a double top formation? Double tops can enhance technical analysis when trading both forex or stocks, making the pattern highly versatile in nature. Learn more about the double top formation here: https://t.co/t9FlspUVZz https://t.co/ewdevfzq9I
  • Bank of Japan: - Outlook highly uncertain amid Covid - Asset purchase outline unchanged - Cuts assessment of production - exports, production impacted by supply side constraints - BBG
  • Heads Up:🇯🇵 BoJ Interest Rate Decision due at 03:00 GMT (15min) Previous: -0.1% https://www.dailyfx.com/economic-calendar#2021-09-22
USD/MXN Slides on Lower US Treasury Yields, Market Focus Turns to NFP Data

USD/MXN Slides on Lower US Treasury Yields, Market Focus Turns to NFP Data

Diego Colman, Market Analyst

MEXICAN PESO OUTLOOK:

  • The Mexican peso appreciates at the start of the week as US treasury yields continue to lose ground in the fixed income market
  • The path of least resistance for USD/MXN appears to be lower on the back of the dovish Fed
  • In this article we talk about the most important technical levels for USD/MXN in the short term
Advertisement

Most read: Powell Paves the Way for USD/MXN Weakness in the Near Term

USD/MXN fell moderately and accumulated further losses at the start of the week after Friday's big drop triggered by the Fed's dovish tone at the Jackson Hole Symposium. As a reminder, at the summit, Jerome Powell decoupled taper from liftoff, but more importantly, he did not commit to a timetable to begin reducing asset purchases, a sign that policymakers may be inclined to wait a bit longer before starting to withdraw accommodation.

The central bank chairman’s dovish message has led investors to conclude that a “taper announcement” will not occur at the September FOMC conclave, but towards the end of the year at the November or December meeting when the labor market is in a much better position. These new expectations have sent US treasury rates lower at the long end of the curve, with the US10Y yield dropping from 1.35% to 1.28% in the last couple of days.

With treasury rates in retreat, the US dollar may fall further in the near term, especially against the higher-yielding Mexican peso, one of the currencies with the most attractive carry-adjusted-for-volatility in the EMFX complex. This means the USD/MXN could potentially lose more ground and easily break below the 20.00 psychological mark as we enter the new month.

While the path of least resistance for USD/MXN appears to be lower, there are risks to the bearish outlook that traders should be aware of. That said, a key threat this week is US economic data, specifically the August employment (NFP) report set to be released Friday just ahead of Labor Day Holiday (US markers will close on September 6th for Labor Day). Traders expect to see 750,000 new jobs, with forecasts ranging from 450,000 to 950,000. Any figure close to one million jobs could make the dollar shine, while anything below 500K should weigh on the greenback and boost EMFX.

In gauging the potential market response, it should be noted that liquidity is likely to be considerably lower heading into the holiday weekend, which coincides with the end of the summer/holiday season. A low liquidity scenario may produce a USDMXN outsize reaction if NFP results surprise in either direction, but the move may be larger if employment gains blow out estimates, as this may prompt traders to recalibrate expectations and rekindle bets of a September taper announcement.

USD/MXN TECHNICAL ANALYSIS

In the last few days, USD/MXN has dropped towards a key support in the 20.20/20.10 area, where the August 25 low converges with the 200-day moving average.If bears maintain control of the market and drive price below this critical floor, we could see a move towards 19.80 in short order.

On the flip side, if USD/MXN pivots higher unexpectedly, the first technical resistance to consider appears at 20.45/20.50. An rise above this barrier would put the June high at 20.75 in focus.

USD/MXN TECHNICAL CHART

USDMXN technical chart

EDUCATION TOOLS FOR TRADERS

---Written by Diego Colman, DailyFX Market Strategist

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES