USDMXN Higher after Mexico Consumer Confidence beat Forecasts
The US Prelim GDP data met the market consensus at 2.1%, allowing the USDJPY to trade lower on the back of yesterday’s fundamentals which put bearish pressure on the pair. The USDJPY is currently trading at 109.866 and is close to mounting a challenge on the support level at 109.704.
The USDJPY assumed a bearish tone this week after yesterday’s downbeat US Consumer Confidence data. The lacklustre GDP result ensures that the pair continues on its downside path. There are growing expectations that the US Federal Reserve may be forced to cut interest rates to counteract any negative impact that the coronavirus could have on the US economy. The earnings guidance downgrades by Apple, MasterCard and Microsoft could be the motivating factor to get the Fed in this direction.
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The failure of the upside move has pushed the USDJPY back into the long-term symmetrical triangle and also into the ascending channel. With the markets now pricing in a possible 25bps rate cut by the fed at the start of Q2 2020, the USDJPY is trading lower and is set to test the support at 109.866. A breakdown of this support area would allow the pair to target the 109.30 price level (highs of 1 August, 30 October 2019 and 29 January 2020). A breakdown of this new support would pave the way towards the attainment of the channel’s lower border. The downside targets at 108.42 and 107.82 are only attainable if the channel’s lower edge were to break down.
On the flip side, a bounce from 109.866 allows the pair the opportunity to recover to 110.58. However, such a move must overcome the risk-off market sentiment to come to fruition.