CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

USD/MXN continues to grind lower after Mexico CPI

January 10, 2023 7:52 PM

Mexico CPI remains high.  After reaching a peak of 8.70% in both August and September, Mexico’s CPI deceleration stalled in December at a reading of 7.82% YoY vs a November print of 7.8% YoY.  However, the Core CPI fell from a peak of 8.51% YoY in November to 8.35% YoY in December.    What does this mean for the Bank of Mexico (Banxico)?  Recall that Banxico has been in lockstep with the US Federal Reserve regarding its interest rate hikes since early last summer.  US inflation peaked in July, while Mexico’s inflation peaked in September.  However, December’s US CPI is expected to continue to fall again to 6.5% YoY when it is released on Thursday vs 7.1% YoY in November.  In addition, the Fed is expected to hike rates by 25bps on February 1st.  If the US CPI comes out “as expected” at 6.5%, there will now be a larger gap between Mexico’s inflation (at 7.82%) vs US inflation.  Will the Bank of Mexico be forced to hike another 50bps, despite the US possibly only hiking 25ps?

What is inflation?

Since the markets opened on January 3rd, USD/MXN has not had a positive daily close.  Price has moved from 19.5206 down to current price near 19.0619, a loss of roughly 2.15%. Additionally, USD/MXN has made a lower close on 11 of the last 14 trading days.  Currently, price is closing on the lows from November 29th, 2022, at 19.0400.  If price does break the November 29th lows, the next support level isn’t until 18.8234, which is the lows from February 2020.  Below there, price can fall to 17.9315, which is the low from April 2018 and the bottom trendline of the downward sloping channel dating to December 2021.

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, the RSI is diverging with price, an indication that price may be ready for a bounce.  If the recent lows do hold, first resistance is at the top trendline of a shorter-term channel that USD/MXN has been in since the beginning of the year and horizontal resistance at 19.2573.  Above there, resistance is at the highs of January 6th near 19.3490, then again at the highs of December 30th at 19.5888.

Source: Tradingview Stone X

The US releases CPI on Thursday.  If the print is as-expected or lower-than-expected, the Bank of Mexico may have to break the peg of rate hikes to that of the FOMC.  Therefore, watch for USD/MXN to move lower if Banxico keeps a more aggressive rate hike stance than that of the Federal Reserve.

Learn more about forex trading opportunities.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024