Mexico Mid-month inflation shows rates continue to climb; USD/MXN
Mexico released its mid-month inflation report for August earlier today and inflation rates continue to rise. The headline print was 8.62% YoY vs an expectation of 8.52% YoY and a reading of 8.16% YoY in July. This was the highest inflation reading for Mexico since the early 2000s. In addition, the mid-month Core Inflation Rate for August was 7.97% YoY vs 7.8% YoY expected and a July reading of 7.56% YoY. This was the highest reading since December 2000. The Central Bank of Mexico (Banxico) targets 3% inflation. Recall that at the last Interest Rate Decision meeting, the Central Bank hiked rates by 75bps to bring the key rate to 8.5%, citing ongoing inflationary pressures. In addition, the Banxico revised its inflationary outlook higher to Q3 2023 but said it expects inflation to converge at its 3% target by Q1 2024. And, as with most central banks as of late, Banxico has said that it will move to make decisions for its next rate decision based on incoming data and did not provide forward guidance for its next rate move.
On a daily timeframe, USD/MXN has been making lower highs since April 3rd, 2020, during the height of the pandemic when the pair traded as highs as 25.0457. However, the pair has formed as strong support zone between 19.5491 and 19.7063. Throughout 2022, USD/MXN has been moving is a downward sloping channel. On May 30th, the pair tested the bottom of the support zone, making a new low at 19.4136, however price held the bottom trendline of the channel. As often is the case, when price fails to breakout through one side of the pattern, it often moves to test the other side of the pattern. USD/MXN bounced above the top trendline to the 61.8% Fibonacci retracement level from the highs of November 25th, 2021 to the lows of May 30th at 21.1079, however the move failed and price moved back into the channel.
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 240-minute timeframe, USD/MXN may be looking to move to retest the bottom trendline of the channel, which is now near 18.8292. However, if price is to get there, it must first pass through horizontal support at 19.8200, then the previously mentioned support zone between 19.5491 and 19.7063. Below there, the next support levels are the 127.2% and 161.8% Fibonacci extensions from the low of June 27th to the high of July 14th at 19.5137 and 19.0957, respectively. However, if support holds, the first resistance level is the high from August 19th at 20.2671, then the top, downward sloping channel from the longer timeframe near 20.5173. Above there, price can move to the highs of August 2nd at 20.8400.
Source: Tradingview, Stone X
Mexico’s mid-month inflation rate hit a new high for the cycle today at 8.62%, which is helping push USD/MXN lower today towards prior support. Will inflation continue to move higher? It may depend on what the Central Bank of Mexico does when it meets again at the end of September!
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