USD/MXN Forecast: USD to Peso Outlook Ahead of Mexico Retail Sales

Summary:
• The USD/MXN price retreated to the lowest level since June 13th after the extremely hawkish statement by Jerome Powell.

The USD/MXN price retreated to the lowest level since June 13th after the extremely hawkish statement by Jerome Powell. The USD to MXN exchange rate dropped ahead of the Mexican retail sales data. It is trading at 20.06, which is about 3.10% below the highest point this month. 

Mexican peso rally continues

The USD to peso pair continued rallying as Jerome Powell testified before the Senate on the state of the American economy. In his statement, he reiterated that the bank will continue hiking interest rates in the coming months as inflation remained at elevated levels. 

He also warned that rate hikes will continue until there are enough signs that inflation is cooling. Most importantly, he said that these rate hikes will likely lead to a recession in the coming months. Analysts believe that a recession is inevitable at this point. Powell will continue with his testimony on Thursday although the impact on the market will be a bit limited.

The USD/MXN price will react to the upcoming Mexico retail sales numbers. Analysts expect the data to show that sales rose from 3.8% in March to 4.3% in April. On a month-to-month basis, they see sales having risen from 0.4% to 0.5%. The Mexican statistics agency will publish the half month inflation data. These numbers come at a time when the Mexican Central Bank is hiking rates.

USD/MXN forecast

The four-hour chart shows that the USD to MXN price formed a double-top pattern at 20.70. In most cases, a double-top pattern is usually a bearish sign. It managed to move below the chin of the double-top pattern at 20.21. It has also crossed the 25-day moving average while the Relative Strength Index (RSI) is tilting lower. 

Therefore, the path of the least resistance for the USD/MXN price is bearish, with the next key support to watch being at 19.61. This price is along the first support of the Woodie pivot points. A move above the resistance at 20.15 will invalidate the bearish view. Read more about our peso-to-dollar long-term outlook. Also, find out the up-to-date USDMXN price support and resistance levels using our S&R indicator here.