Since January the MXN value has stabilized and is changing against the USD in a strictly defined range of 18,507 - 18,993 MXN. On the chart we can see a stable flat trend. The MXN remains under pressure due to the protectionist policies of Donald Trump and the situation in the economy of Mexico, which is not so perfect to positively affect the value of the MXN. However, since March, the Mexican currency has strengthened within the specified range.
This week the MXN has strengthened amid a weakening of the USD due to the resignation of Rex Tillerson. In addition, investors weren't inspired with the latest data on the US economy, in particular, data about inflation and the producer price index (PPI) which matched market expectations. However, investors wanted more, which would increase the probability of a FED rate hike 4 times this year, instead of the three planned increases, although the probability of a rate hike this month remains more than high.
Will the MXN be able to take advantage of the temporary weakening of the dollar? This has already happened: the rates from the resistance line have rapidly moved to the support line, but for further strengthening additional factors will be needed. Inflation in February was 5.34%, which is the lowest level for the last 12 months. However, the inflation target set by the Central Bank of Mexico is 3%, and despite the decline in inflation for the second consecutive month, reaching the target level of 3% is a long-term goal. Another positive factor for the Mexican economy was the increase in industrial production, which had been decreasing for 7 months in a row. At the same time, the decline in the consumer confidence index for the third month in a row is a negative factor for the Mexican economy.
In the absence of a sufficient number of incentives, it can be expected that the MXN will recede from the reached positions while the USD will get rid of the temporary negative political factors and will receive support through new economic statistics, which are expected today. In the medium term, the dollar may strengthen due to the Fed rate hike in March. Thus, the deals to BUY seem the most optimal at the moment. The entry points are also at the levels of 18,507 and 18,993 MXN, the breaking of which may be a sign of the formation of a new trend.
