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USD/MXN: Move Upwards Yesterday a Solid Dose of Fundamentals – 14 September 2022

The Mexican Peso has been stronger against the USD the past year, more than many of the other major currencies, largely because Mexico is a large exporter of Crude Oil.

The USD/MXN reflected the broad Forex world yesterday when the currency pair suddenly bounced higher as it reacted to the U.S inflation data published.

The USD/MXN is trading above the 20.00000 realm as of this morning as it traverses for the moment in a rather calm range near the 20.02500 mark. A low of nearly 19.78800 was displayed yesterday, and the day before on Monday a depth around the 19.75400 was briefly tested. The lows produced the past two days tested support last challenged in the second week of June this year.

However via a jolt of U.S inflation data coming in higher than expected yesterday, the USD/MXN sprung upwards. A mark of 20.10900 was demonstrated for a moment, but since then the USD/MXN has moved slightly lower again. Tuesday’s burst higher within the USD/MXN demonstrated clearly the currency pair does now trade in a vacuum. The Mexican Peso has been stronger against the USD the past year, more than many of the other major currencies, largely because Mexico is a large exporter of Crude Oil.

Near Term Range needs to be contemplated with Caution

Having traded above the 20.00000 juncture with a swift kick upwards, the USD/MXN will now be watched to see if this slightly higher range can be maintained over the near term. The U.S Federal Reserve will certainly raise its interest rate next week, likely by another 0.75%. The question financial institutions now need to reconsider is what the U.S central bank will do afterwards.

Yesterday’s U.S Inflation data via the Core CPI will affect the Outlook for the Federal Reserve

It is likely the U.S Federal Reserve will have to hike interest rates aggressively in the coming months. Yesterday’s Core Consumer Price Index results came in with a 0.6% gain compared to the anticipated mark of 0.3%. This differential puts the U.S central bank in a difficult position, as they try to battle inflation with seemingly little to show for it regarding real lower prices. Higher core consumer prices for food remains a tangible problem, a fundamental risk.

If the 20.02000 support level proves durable and behavioral sentiment remains nervous, traders may be tempted to be buyers of the USD/MXN and target the 20.05000 to 2.07000 realms.Additional global market nervousness today could spark more volatility near term, and speculators should practice solid risk taking mandates such as stop loss, entry price orders and take profit techniques.

Conservative traders may want to wait for downward reversals to test current support levels to ignite buying positions. In the near term the USD/MXN may prove to be a worthwhile speculative bullish wager while aiming for realistic price targets above.

USD/MXN Short Term Outlook:

Current Resistance: 20.04900

Current Support: 20.01500

High Target: 20.12200

Low Target: 19.96600

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