USDMXN snap three days losing streak and rebounds having tested earlier today the 100-day moving average. Investors await the Banxico decision on interest rates tomorrow.
Despite the four rate cuts this year, the Mexico interest rates remain higher than in other western economies, and many analysts expect the central bank to continue the easing in monetary policy down to 3.5%.
Analysts expect that the central bank of Mexico will proceed tomorrow with one more cut by 50 basis points and will reduce the interest rates to 5%. Banxico has cut four times the interest rates in 2020 from 7.25% to 5.5% in the May meeting.
Banxico in May policy meeting noted that the risks are to the downside amid the coronavirus outbreak and left the doors open to further interest rates cuts as it continues to monitor the coronavirus impact on the economy. Mexico annual inflation decreased from 3.25% to 2.15% in April 2020, while economic activity in Mexico contracted by 1.2% during the first quarter of the year.
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USDMXN is 0.81% higher at 22.5976 as the pair testing the strong base at the 100-day moving average. The pair breached for three days in early June below the 100-day moving average on reopening optimism, but the greenback quickly managed to rebound. The technical picture is bullish above the 100-day moving average, but a break below would cancel the positive momentum, and more sellers might join the selling action.
On the upside, initial resistance for the USDMXN pair stands at 22.6264 the daily high. A break above might push the price to 22.8219 the high from June 17 trading session. In case the USDMXN pair breaks above 22.8219, then the next resistance will be met at 23.1845 the 50-day moving average.
On the other side, the first support for USDMXN pair will be met at 22,3076 today’s low. The next support area for the pair stands at 21.9371 the low from June 16. The next target on the downside for the bears is at 21.4656 the low from June 9.