Mexican Peso struggles for direction on risk-off mood, dovish Banxico’s tone

• Mexican Peso (MXN) experiences some volatility to start the week, initially rising against the US Dollar (USD) before retreating.
• Banxico's Governor Victoria Rodriguez Ceja's comments on potential rate cuts next year add pressure on the Mexican Peso.
• A risk-off impulse keeps the USD/MXN on positive territory despite overall US Dollar weakness.

Mexican Peso (MXN) loses some ground against the US Dollar (USD) early during the North American session on Monday. The USD/MXN pair reached a low of 17.60 but bounced as buyers regained control, lifting the exchange rate to 17.65, up0.04% on the day.

Mexico's economic docket is empty following last Thursday’s Bank of Mexico – also known as Banxico – decision to hold rates at 11.25% and remove hawkish comments from its statement, which weighed on the Mexican Peso. Nevertheless, the Peso trimmed some losses on Friday, but now, USD/MXN buyers are trying to break the 200-day Simple Moving Average (SMA) at 17.66. On Monday, dovish remarks by Banxico's Governor Victoria Rodriguez Ceja keep the USD/MXN trading with minuscule gains.

Daily digest movers: Mexican Peso remains range bound despite market sentiment shifting sour

• Banxico’s Governor Victoria Rodriguez commented that the easing inflationary outlook could pave the way for discussing possible rate cuts. She said that monetary policy loosening could be gradual but not necessarily imply continuous rate cuts, adding that the board would consider macroeconomic conditions, adopting a data-dependent approach.
• Industrial production in Mexico cooled down, according to data provided by the National Statistics Agency (INEGI) on November 10. The output grew by 3.9% YoY in September, below the 4.4% forecast, trailing August’s 5.2%.
• The latest inflation report in Mexico, published on November 9, showed prices grew by 4.26% YoY in October, below forecasts of 4.28% and prior rate of 4.45%. On a monthly basis, inflation came at 0.39%, slightly above the 0.38% consensus and September’s 0.44%.
• Last Thursday’s hawkish remarks by the US Federal Reserve Chairman Jerome Powell sponsored the USD/MXN a leg up, toward 17.93, before paring some losses.
• Mexico´s economy remains resilient after October’s S&P Global Manufacturing PMI improved to 52.1 from 49.8, and the Gross Domestic Product (GDP) expanded by 3.3% YoY in the third quarter.
• Banxico revised its inflation projections from 3.50% to 3.87% for 2024, which remains above the central bank’s 3.00% target (plus or minus 1%).

Technical Analysis: Mexican Peso remains steady despite Golden Cross surfacing, USD/MXN stays in the green

The USD/MXN remains neutral to upward biased, at a brisk of breaking crucial resistance levels, like the 200-day Simple Moving Average (SMA) at 17.66, followed by the 50-day SMA at 17.70. Once those two levels are breached, the next resistance would emerge at the 20-day SMA at 17.91 before buyers could lift the spot price towards the 18.00 figure.

Conversely, key support levels lie at 17.50, followed by the November 9 low at 17.47 and the 100-day Simple Moving Average (SMA) at 17.33. A loss of the latter will expose the 17.00 psychological level before the pair aims to test the year-to-date (YTD) low of 16.62.