Mexican Peso: Under pressure as Banxico pauses – Societe Generale

Societe Generale strategists note USD/MXN has held key lows near 17.10 and is now trying to break out from a small base formation. Initial resistance is at the 200-day moving average around 17.80, with a recent low at 17.30 acting as support. Banxico kept rates at 6.50%, signalling a longer pause, while markets price a modest hike by year-end.

Breakout attempt with key levels

"The policy rate in Mexico was maintained at 6.50% and the tone of the statement was neutral, suggesting at longer pause. Markets discount +25bp before year-end. Inflation projections by the central bank were largely unchanged."

"Mid-June inflation slowed more than expected to 3.55% while economic activity (proxy for monthly GDP) climbed 1.2% m/m in April, the fastest pace since March 2021. Mexico sold $6.3bn two-part USD debt."

"USD/MXN crossed 17.50 for the first time in three months, opening up the 200dma at 17.78 as the impending USMCA review looms in early July."

"USD/MXN held the January/February troughs near 17.10 during the recent pullback attempt, signalling first signals of waning downward momentum. The pair is now attempting to breakout from a small base formation."

"Initial resistance is seen at the 200-DMA around 17.80. A cross above this would be crucial for confirming a larger rebound. The low reached earlier this week at 17.30 may serve as near-term support."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)