Bank of Mexico hikes 75bps after higher inflation reading
The Bank of Mexico (Banxico) hiked rates by 75bps from 7% to 7.75% during its June interest rate decision meeting. This is the 9th hike in the cycle, which began in June of last year and is the highest interest rate level since October 2019. This came hours after Mexico released its June mid-month Inflation rate at 7.88% YoY vs 7.7% YoY expected and up from 7.58% YoY in May. In addition, the mid-month Core inflation rate was 7.47% YoY vs 7.3% YoY expected and 7.24% YoY previously. These numbers are still well above the central bank’s target inflation rate of 3.0%. The primary reason for raising rates was due to increasing inflationary pressures and tighter monetary pressures worldwide. Banxico also raised its inflation forecast peak from 7.6% in Q2 2222 to 8.1% in Q3 2023, while at the same time maintaining its convergence to the 3% target rate in Q1 2024. In addition, as with many other central banks, Banxico said it will take act forcefully if needed.
On a monthly timeframe, as the coronavirus pandemic began in early 2020, USD/MXN rose from 18.5235 to a high of 25.7836 during the week of April 6th, 2020. Since then, the pair has been moving lower in a series of lower highs. However, USD/MXN has bounced each time it has fallen to the 20.0000 area. The pair is currently nearing the apex of the descending triangle. Will it finally break?
Source: Tradingview, Stone X
Trade USD/MXN now: Login or Open a new account!
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
On a daily timeframe, USD/MXN has been moving lower in an orderly channel since late November 2021. Price reached its lowest levels since March 2020 on May 30th at 19.4136, testing the bottom of the support zone where price has held below 20.000. USD/MXN then bounced back above 20.0000, reaching a high of 20.7012 on June 16th. Since then, price has been moving lower, and once again cracked below the 20.0000 line.
Source: Tradingview, Stone X
On a 240-minute timeframe, USD/MXN has recently broken below the 61.8% Fibonacci retracement level from the lows of May 30th to the highs of June 16th , near 19.9055. If price is to continue lower, it must first pass through horizontal support at 19.7720, then a range of long-term support between 19.7282 and 19.5734. Below there, price can trade to the lows of May 30th at 19.4135. However, notice that the RSI is in oversold territory, an indication that USD/MXN may be ready for a bounce. If the support holds and USD/MXN goes bid, first resistance is at the psychological round number of 20.0000. Above there, price can move to price can move to horizontal resistance near 20.2171, then the highs of June 16th at 20.7012.
Source: Tradingview, Stone X
Banxico hiked interest rates yesterday by 75bps, matching that of the US 2 weeks ago. Earlier in the day, mid-month inflation came in hotter than expected. As a result, USD/MXN has continued its long term move lower, once again cracking the key 20.0000 level. Will it continue lower? It may depend on whether the central bank decides to hike another 75bps at its August meeting!
Learn more about forex trading opportunities.
From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.
City Index is a trading name of StoneX Financial Pty Ltd.
The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.
While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.
StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.
It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.
StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.
© City Index 2024