The Mexican Peso (MXN) experienced a pullback on Thursday after a surge on Wednesday. The Peso strengthened against the US Dollar (USD) and other major currencies due to lower-than-expected US inflation and Retail Sales data.
Reasons for the Pullback:
- Profit-Taking: Investors might be taking some profits after the Peso’s significant gains.
- Consolidation: The pullback could be a temporary pause for consolidation before the Peso resumes its upward trend.
Factors Supporting the Peso:
- Weaker US Dollar: The prospect of a dovish Federal Reserve, fueled by soft US data, weakens the USD, benefiting the Peso.
- Lower US Interest Rates: Lower US interest rates could attract less foreign investment to the US, making the Peso more attractive.
Technical Analysis (USD/MXN):
- Downtrend Resumes: The pair is back on a downward trajectory after briefly touching resistance at 16.86.
- Support Levels: The next potential support levels are 16.54 (0.681 Fibonacci retracement) and 16.34 (full range height).
- Trend Reversal: A decisive break above 16.86, with a long green candlestick closing near its high or three consecutive green candles, could indicate a reversal of the downtrend.
The Peso’s pullback might be a temporary pause. The underlying factors, such as a weaker USD and potential rate cuts in the US, still favor the Peso’s appreciation in the medium term.
