- Summary:
- The USDMXN pair declined today as the crude oil price bounced back today. It also fell because of better than expected inflation data from Mexico.
The USDMXN pair declined today as the market reacted to the upbeat crude oil prices and better-than-expected inflation data.
Crude oil price boosts Mexican peso
Mexico is one of the third-biggest crude oil producers in North America after the United States and Canada. The country produces more than 3 million barrels of oil every day and exports most of it. As a result, the Mexican peso is highly sensitive to the price of oil.
Today, crude oil price was upbeat, with the West Texas Intermediate (WTI) rising by more than 10%. Brent, the global benchmark rose by more than 6% as the market remained optimistic about the global recovery. As a result, the stock price of oil-related companies like Shell and Chevron rose while energy currency pairs like USD/MXN and USD/NOK declined.
Mexico inflation data better than expected
The USD/MXN pair also declined because of the CPI data from Mexico. Numbers from the Mexican bureau of statistics showed that the headline consumer prices dropped by 1.01% in April. This was a deep decline from the previous decline of -0.05%. Similarly, the inflation rose by 2.15% on a year on year basis. Most analysts polled by Bloomberg were expecting the CPI to jump by 2.13%. At the same time, the core CPI, which excludes the volatile food and energy products rose by 0.36% from the previous 0.29%.
According to the bureau, the prices of agricultural products declined by 0.79% in April while energy prices fell by 8.97% mostly because of the low oil prices.
At the same time, data from the bureau showed that the national index of precision rose at a monthly rate of 1.44%. It rose by 3.07% on an annual basis. This growth was mostly because of a 2.2% rise in companies in the secondary activities. It was followed by a 0.46% increase of groups in the primary activities and 0.23% for those in the tertiary activities.
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USDMXN technical outlook
The USDMXN pair declined to 24.000 in reaction to the inflation data and crude oil prices. On a hourly chart, this price is slightly above the 23.6% Fibonacci retracement level of 24.0380. Also, we see that the pair has been on a strong downward trend since peaking at 24.5332 earlier today. Therefore, I expect the bearish trend to continue in the near term as bears attempt to test the 23.6% Fib level at 24.0380.
On the flip side, a move above the 50% retracement level of 24.4560 will invalidate this prediction because it will show that there are still more buyers in the market.
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