Most recent article: Mexican Peso slumps amid weak Retail Sales ahead of GDP data
- The Mexican Peso recovers on Wednesday after Tuesday’s sell-off following weak retail sales data.
- Carry trade outflows and investor concerns regarding judicial reforms are also weighing on the MXN.
- Technically, USD/MXN may be starting a new leg higher within its rising channel.
The Mexican Peso (MXN) recovers in its most heavily-traded pairs on Wednesday. The bounce comes after the Peso fell between 1.50% and 2.00% in its key pairs on Tuesday after the release of Retail Sales data showed shoppers curtailed their spending in June.
The weak retail sales data could suggest inflation may be set to fall further, increasing the chances of the Banco de Mexico (Banxico) cutting interest rates further – a negative for the Peso, since lower interest rates attract less foreign capital inflows.
Lower interest rates could increase speculation investors are pulling out of their long Peso carry trade positions. With interest rates falling in Mexico and the Peso starting to trend lower too – whilst the opposite happens in Japan – the carry trade, which capitalizes from the interest rate differential between the two currencies, could see more outflows from the MXN.
Mexican Peso reverses trend after news of judicial reforms
The Mexican Peso reversed its temporary recovery rally from the August 5 lows after the Mexican government announced more details about their controversial judicial reforms on Friday, according to Commerzbank. These concerns, which some investors have interpreted as market unfriendly, led to a rapid depreciation in the currency after the June elections, and may have also contributed to the Peso’s generally weak tone over recent days.
USD/MXN in particular may see volatility on Wednesday with the publication in the US of the Quarterly Census of Employment and Wages (QCEW) for March. The data is benchmarked against US Nonfarm Payrolls (NFP) for comparison. If the census data differs from the NFPs it may lead to revisions in the latter.
Although the data will only cover the period to March 2024 (avoiding the latest and weakest payrolls), a big downward revision could revive fears that the US economy is heading for a hard landing. This, in turn, could weaken the US Dollar (USD). Additionally, the Federal Reserve will release the minutes from its July policy meeting.
For more macroeconomic news from Mexico, traders will have to wait for Thursday when 1st Half-Month Inflation for August and Q2 Gross Domestic Product (GDP) data will be published by INEGI.
At the time of writing, one US Dollar (USD) buys 18.99 Mexican Pesos, EUR/MXN trades at 21.08, and GBP/MXN at 24.71.
Technical Analysis: USD/MXN could be starting new up leg
USD/MXN gained over 1.7% on Tuesday, reversing the prior evolving down leg within the pair’s broader rising channel.
The long green up day posted on Tuesday means that the bearish Shooting Star candlestick pattern of the prior day failed to gain bearish confirmation. This could indicate the short-term trend is changing and the pair may be about to begin a new up leg within the channel.
USD/MXN Daily Chart
USD/MXN had been looking like it was unfolding in a bearish abc pattern within its rising channel, however, wave “c” has so far failed to extend all the way down to the lower channel line.
It is not clear what will happen next: it is possible the pair could recapitulate and start to move back down again, eventually reaching the lower channel line or at least the 50-day Simple Moving Average (SMA) lying just above at 18.43.
Alternatively wave “c” may have extended as far as it is going to go and the start of a new up leg is now unfolding. A break above the top of wave “b” at 19.10 would provide extra confirmation that a stronger up move was underway.
The overall trend on the medium and longer-term time frames is arguably up, suggesting a bullish backdrop that provides extra support to the view that a new upward move is underway.
Economic Indicator
Retail Sales (MoM)
The Retail Sales released by INEGI measures the total receipts of retail stores. Monthly percent changues reflect the rate of changes of such sales. Changes in retail sales are widely followed as an indicator of consumer spending. Generally speaking, a high reading is seen as positive or bullish for the Mexican peso, while a low reading is seen as negative or bearish.
Read more.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD now looks at the 0.6800 barrier
![AUD/USD now looks at the 0.6800 barrier](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/AUDUSD/macro-of-aussie-20-note-8668638_XtraSmall.jpg)
Further losses in the Greenback lent extra legs to the already strong rally in the Aussie Dollar, lifting AUD/USD to fresh multi-week highs around 0.6760 ahead of key flash PMIs due on Thursday.
EUR/USD finds fresh 13-month high as Greenback pummeling continues
![EUR/USD finds fresh 13-month high as Greenback pummeling continues](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/EURUSD/money-13797882_XtraSmall.jpg)
EUR/USD breached into a fresh 13-month peak on Wednesday, testing north of 1.1150 as the pair continues to grind its way toward 1.1200. Markets are selling off the Greenback across the board as investor confidence in a September rate cut rises to dizzying highs.
Gold price stays around $2,500 post US Fed minutes
![Gold price stays around $2,500 post US Fed minutes](https://editorial.fxstreet.com/images/Markets/Currencies/Crosses/XAUUSD/gold-ingot-20089693_XtraSmall.jpg)
Gold stayed firm above $2,500 for the third straight day after Minutes of the US Federal Reserve opened the door for an interest rate cut at the upcoming September meeting, weakening the Greenback. The XAU/USD trades at $2,511, virtually unchanged.
GRIMACE meme coin suffers rug pull after promotion on hacked McDonald's Instagram account
![GRIMACE meme coin suffers rug pull after promotion on hacked McDonald's Instagram account](https://editorial.fxstreet.com/images/Markets/Currencies/Cryptocurrencies/crypto_matrix-637516561995093295_XtraSmall.jpg)
McDonald's Instagram account suffered a hack on Wednesday after it promoted a Solana-based meme coin named after GRIMACE, one of its packaging characters. Following the hack, insider holders began to dump their tokens, driving the token's market cap from $20 million to $599K.
NFP revisions serve as another wake-up call for the Fed
![NFP revisions serve as another wake-up call for the Fed](https://editorial.fxstreet.com/images/Macroeconomics/EconomicIndicator/Employment/NFP/a-mock-news-paper-headlines-unemployment-16543089_XtraSmall.jpg)
Stocks stayed firmly in the green as the Fed minutes all but locked in a September rate cut, especially with recent inflation data paving the way. But the surprise cameo from the NFP revision stole the show.
Moneta Markets review 2024: All you need to know
![Moneta Markets review 2024: All you need to know](https://editorial.fxstreet.com/images/IT/Testing/Review/FXSBadgeCertifiedBackg_XtraSmall.png)
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.