Mexican Peso Weekly Forecast: NFP Miss Helps USD/MXN Break Lower, Banxico Meeting in Focus

USD/MXN Forecast: Bearish

A big miss on the US jobs data published on Friday helped USD/MXN get back below the 20 pesos mark. April’s non-farm payrolls were forecasted to come in hot at over 900k jobs added after the ADP data released on Wednesday had shown over 700k private payrolls added last month. But the actual figure came in at just 266k, a strong disappointment for markets, which saw the dollar dip lower.

USD/MXN had been attempting to break lower the rest of the week, but it wasn’t until the US Dollar got hit on Thursday that the pair managed to gain bearish momentum. The was also the Mexican CPI data published on Friday midday, which showed that prices rose 0.37% in the month of April, taking the year-on-year figure to 6.08%.

Both readings were above expectations and put further pressure on Mexico’s Central Bank (Banxico) to start considering the rise in inflation in its monetary policy meetings. The next meeting is scheduled for this coming Thursday (May 13), with most analysts predicting an unchanged rate at 4%. As stated before, a more hawkish Banxico and a possible rise in rates would be positive for the Mexican Peso, which would likely see renewed carry trade inflows.

Other than that, I expect USD/MXN to continue to be sensitive to USD flows, with bond yields continuing to be a strong focus for investors.

USD/MXN Levels

USD/MXN bulls were able to take the pair higher to end the month of April, marking a monthly high at 20.3280. This allowed Mexican Peso buyers to enter at a more favorable level as USD/MXN continues to drift lower. The key challenge now will be gaining enough momentum to break below key support range at 19.87-77. If so, then the pair is likely to have a clear path lower towards 19.53, where the next support comes into play. On the upside, the 50-day simple moving average (20.27) is likely to offer resistance in the short term, followed by the recent high of 20.32.

USD/MXN Daily chart

Fibonacci Confluence on FX Pairs

--- Written by Daniela Sabin Hathorn, Market Analyst

Follow Daniela on Twitter @HathornSabin