The Mexican Peso experienced a reversal in its earlier losses against the US Dollar due to an improvement in risk appetite. The Peso initially fell after strong US economic data boosted the Dollar on Thursday. However, the USD/MXN pair might be entering a new short-term uptrend following a breakout above a trendline.
On Friday, the Mexican Peso bounced back after a weak start, thanks to a shift in risk sentiment that favored the Peso as a “risk-on” currency. Despite recent weakness against the US Dollar, which threatened to reverse the Peso’s short-term trend, positive economic data from the US delayed expectations of the Federal Reserve lowering interest rates, thus supporting the Greenback.
Data from Mexico’s trade balance showed a larger-than-expected deficit in April, signaling potential challenges for the Mexican economy. Meanwhile, recent economic indicators from Mexico, including the Q1 Gross Domestic Product showing an unexpected upward revision, temporarily boosted the Mexican Peso in trading pairs.
The Bank of Mexico released the Minutes of its May meeting, revealing that policymakers remained cautious about inflation risks despite signs of core inflation declining. The decision to keep interest rates steady at 11.00% was unanimous, reflecting the central bank’s commitment to prudent monetary policy to support inflation convergence to the 3% target.
In technical analysis, the USD/MXN pair broke above a trendline for a previous decline, suggesting a possible short-term uptrend favoring long positions over shorts. However, given the bearish medium and long-term trends, there is still a risk of the short-term uptrend reversing. Traders are advised to monitor key levels for potential trend changes.
One of the key economic indicators for Mexico is the Gross Domestic Product (GDP) released by INEGI, which measures the total value of goods and services produced in the country. A high GDP reading is typically seen as positive for the Peso, while a negative trend can be bearish. Traders should stay informed about upcoming economic releases to make informed decisions in the Forex market.
