Mexican Peso struggles as US Dollar gains momentum

• Mexican Peso at the mercy of US economic data, with traders waiting for the Fed’s last meeting minutes.
• Mexico's Manufacturing PMI dips to 52.0, exerting pressure on the Peso amid positive business confidence data.
• USD/MXN recovers to over 17.00 after a dip, fueled by a rise in US Treasury yields and strong sentiment towards the US Dollar

The Mexican Peso (MXN) began the year on a lower note against the US Dollar (USD) after the exotic pair dipped to a three-month low on December 28 of 16.86. Nevertheless, a rise in US Treasury Bond yields and overall bullish sentiment towards the Greenback (USD) underpins the pair above the 17.05 area for a 0.21% daily gain.

On Tuesday, Mexico’s economic docket featured the S&P Global Manufacturing PMI for December, which printed 52.0, below November’s 52.5, and weighed on the Mexican currency. During the day, business confidence improved while USD/MXN traders digested economic data from the United States (US) revealed at around 15:00 GMT. However, market players await the release of the latest Federal Reserve’s (Fed) meeting minutes.

Daily digest market movers: Mexican Peso losses steam on positive US data

• Commentary from Richmond Federal Reserve (Fed) President Thomas Barkin supported the US Dollar after he stated the US central bank is making real progress in taming inflation. He added that although the economy is headed for a soft landing, risks remain, adding that the potential for additional rate hikes is on the table.
• US economic docket revealed the ISM Manufacturing PMI came in at 47.4, exceeding expectations of 47.1, while the prior reading was 46.7.
• At the same time, the November Job Openings and Labor Turnover Survey (JOLTS) report rose less than estimates of 8.85 million to 8.79 million, while October’s figures were upwardly revised to 8.852 million.
• Later, December’s Federal Open Market Committee (FOMC) minutes will be scrutinized by traders, following Federal Reserve Chairman Jerome Powell’s dovish pivot that fueled a stock rally towards the end of 2023. Fed officials estimate three rate cuts toward the end of December 2024, as depicted by the Summary of Economic Projections (SEP).
• Money market futures data provided by the Chicago Board of Trade (CBOT) shows that traders remain confident the Fed would slash rates by 150 basis points towards the year’s end.

Technical analysis: Mexican Peso stays bearish despite USD/MXN buyers' effort

From a technical perspective, the USD/MXN remains bearishly biased, though sellers need a daily close below the November 27 low of 17.03 to increase their chances of pushing the price back below the 17.00 figure. Once achieved, that could pave the way to test the waters at around 16.86, ahead of falling toward last year’s low of 16.62.

On the flip side, if USD/MXN stays above the 17.00 figure, that could pave the way for a move toward the 17.37-17.43 area, the confluence of the 50, 100, and 200-day Simple Moving Averages (SMAs). If that area is surpassed, expect the USD/MXN to reach the psychological 17.50 area, ahead of the November 10 high at 17.93.

Also read: Mexican Peso Price Annual Forecast: Which factor would impact most in 2024, economics or politics?

USD/MXN Daily Chart