The Mexican Peso (MXN) has been trading in a tight range on Tuesday as it recovers from a post-election sell-off that saw the currency lose about 10% against its key counterparts. President-elect Claudia Sheinbaum has been trying to calm markets by sending positive messages about the economy and the popularity of reforms. The USD/MXN pair continues to pull back amid a short and medium-term uptrend.
Market risk appetite remains strong, with US stock indexes reaching new all-time highs on Monday and Asian investors following suit. This risk-on sentiment is beneficial for the Peso, which typically performs well when investors are more willing to take on risk. Currently, a single US Dollar buys 18.53 Mexican Pesos, with EUR/MXN trading at 19.88 and GBP/MXN at 23.52.
After heavy selling following the June 2 elections, the Mexican Peso appears to be bottoming out as the bearish pressure eases. Concerns about reforms proposed by the new left-leaning government have weighed on the currency, but speculators are now stepping back. Analysts at Capital Economics believe that USD/MXN is fairly priced at 19.00, with the extreme long position that had built up previously now likely neutralized.
President-elect Claudia Sheinbaum has reassured investors about Mexico’s economy, stating that it is healthy and strong. She also pointed to independent polls that show public support for the government’s proposed reforms, which were previously seen as a factor in the Peso’s sell-off. On the data front, the USD/MXN pair could see volatility with the release of US Retail Sales data and Mexican GDP Aggregate Demand for Q1.
In terms of technical analysis, USD/MXN is still pulling back within an uptrend. While there may be further correction to come, the overall bullish trend is expected to resume. The next target higher is at 19.22, with a break above 18.68 providing confirmation of more upside. The RSI has exited the overbought zone, suggesting a possible deeper correction, but the uptrend is likely to continue in the long run.
The latest economic indicator to watch is the US Retail Sales data, which measures total receipts of retail and food stores in the United States. This data is a key indicator of consumer spending, a major driver of the US economy. A high reading is seen as bullish for the US Dollar, while a low reading is bearish. The next release is scheduled for June 18, 2024, with a consensus forecast of 0.2%.
