The Mexican Peso (MXN) weakened against the US Dollar (USD) on Tuesday as markets reopened after the holiday weekend.
Market Drivers:
- Hawkish Fedspeak: Comments from Fed officials, suggesting a more cautious approach to rate cuts, boosted the USD.
- Improved US Consumer Confidence: Despite lingering recession concerns, rising US Consumer Confidence data supported the USD.
- Mexican Elections: The upcoming Mexican general elections on Sunday add uncertainty to the Peso’s outlook.
Technical Analysis (USD/MXN):
- USD Strength: The USD/MXN pair climbed above 16.75, indicating a potential reversal of the previous downtrend.
- RSI Indicator: The Relative Strength Index (RSI) is approaching the 50 midline, suggesting a possible shift towards bullish momentum for the USD.
Support and Resistance:
- USD Upside: A decisive break above the 100-day SMA (16.76) could pave the way for further USD gains towards the 50-day SMA (16.89), the psychological level of 17.00, and the 200-day SMA (17.14).
- MXN Support: If the downtrend resumes, key support levels for the MXN include the 2023 low (16.62), the May 21st cycle low (16.52), and the year-to-date low (16.25).
The MXN’s recent weakness stems from a combination of factors: hawkish Fed comments, improved US economic data, and uncertainty surrounding the Mexican elections. The technical indicators suggest a potential shift in momentum towards the USD. However, the upcoming data releases and the election outcome could significantly influence the direction of the USD/MXN pair in the near future.
