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Mexican Peso Under Pressure as US Dollar Gains Ground

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.