The Mexican Peso (MXN) experienced a significant recovery on Wednesday, breaking a four-day losing streak against the US Dollar (USD). This positive shift was attributed to a boost in market sentiment following comments from Bank of Japan’s Deputy Governor Uchida, indicating a cautious approach to rate hikes. The USD/MXN pair currently trades at 19.18, down over 2%.
Market Drivers:
- Improved Risk Appetite: Uchida’s remarks helped alleviate concerns about market instability, leading to a broader risk-on mood and a recovery in global equities. This positive sentiment has supported the Mexican Peso.
- US Dollar Weakness: The US Dollar Index (DXY) retreated slightly, further contributing to the MXN’s gains.
- Mixed Economic Signals: Recent Mexican economic data, including Automobile Production and Exports figures, showed a slowdown, while upcoming inflation data and Banxico’s monetary policy decision remain in focus.
- Fed Rate Cut Expectations: The market continues to price in over 100 bps of cuts by the US Federal Reserve this year, despite a recent improvement in the ISM Services PMI.
Technical Analysis:
The USD/MXN pair is undergoing a correction, but the overall bullish trend remains intact. A decisive break above 19.50 could lead to further gains towards 20.00 and the year-to-date (YTD) high at 20.22.
On the downside, support levels are located at 19.00, followed by the August 1 swing low of 18.42 and the 50-day Simple Moving Average (SMA) at 18.17.
