USDMXN trades close to daily highs after the GDP data from the USA and Mexico disappointed investors and increase the concerns that the economic recovery will be a bumpy process.
First, the USA GDP contracted by 32.9% slightly better than expectations for a contraction of 34.1% in the second quarter of the year. The GDP Price index came in at -2.1% below the forecast of 1.1% in the second quarter of 2020.
From the employment data front, the Initial Jobless Claims came in at 1434K slightly better than forecasts of 1450K in the week July 24, but it still comes above the 1 million mark showing that the U.S. economy has a long way to go to reach pre-coronavirus levels. The Continuing Jobless Claims is at 17.018M well above the estimates of 16.2M in the week of July 17.
On the other hand, the Mexican GDP preliminary reading came down to 17.3% in the second quarter marking the sharpest drop in history. The first-quarter GDP was at -1.2%. The news halts the rally of the Mexican peso against the USD as the Mexico economy continues to struggle amid the coronavirus pandemic while the news that Mexico biggest trade partner – the USA – GDP slumped by over 30% point to rocky next quarter for the economy.
The Mexican data today will put pressure to Banxico to proceed with another interest rate cut in the next policy meeting in August.
USDMXN is 0.91% higher at 22.1727 as the pair rebounds from monthly lows. The pair spent two days below and outside the descending wedge but today managed to return inside the safety of the formation, cancelling an upcoming sharp drop.
USDMXN would face the first resistance at 22.2410 the daily top. The 50-day SMA is the next obstacle at 22.3663, a level that the USDMXN pair rejected several times during June and July. In case of a successful break above then, the next target would be the 100-day moving average at 23.1654.
On the other hand, initial support is at 21.9619 today’s low, and then at 21.8463 the low from yesterday. More bids would emerge at 21.47 the low from June 9.
