USD/MXN Forecast: Sell-Off In Play As US Dollar Cools It
Our USD/MXN forecast notes the pair has been dropping significantly of late as the US Dollar Index is in a temporary correction.Actually, a downside movement was in the to some extent after the dollar gains seen last week. The pair could now retest a number of near-term support levels before coming returning to the upside.The pair is fighting hard to recover, not helped by US Fed chairman to the US Congress yesterday and US economic data coming in mixed today.The Flash Manufacturing PMI increased from 62.1 to 62.6 points even though analysts had expected to see a decrease to 61.5 points. Also, the Flash Services PMI dropped from 70.4 to 64.8 points, far below the 70.0 mark expectations.In addition the indicator dropped unexpectedly from 817k to 769k for the four consecutive month of declines, when economists had been expecting to see an increase to 864K. On the other hand the Current Account data improved, and was reported at -196 billion for May versus -175 billion in the previous month, but failing to reach the -205 billion forecast.Mexico interest rate decision due tomorrow, 24 JuneIn Mexico, Banxico is expected to leave interest rates unchanged at its meeting tomorrow (Thursday 24 June).Having said that, in its previous meeting the central bank of Mexico did shift from a neutral stance on inflation to one in which it determined that the risk had shifted to the upside. Nevertheless, no surprises are expected on the policy front. Interest rates are currently at 4% in Mexico.Dutch bank Rabobank sees the Mexican Peso settling in a trading range between 19.50 to 21.0 with a slightly bias in the 19.80 to 20.60 region.USD/MXN forecast: technical analysisUSD/MXN is trading at 20.303 level at the time of writing and it could try to come back towards the 38.2% retracement level if the DXY was to rebound – the pressure to do so is high as long as it stays under this obstacle.The next downside targets are seen at the former downtrend line and at the ascending pitchfork’s median line (ml). The price could be attracted by the confluence area formed at the intersection between these two levels.Dropping below these levels and under the 23.6% retracement level will emphatically signal a strong drop towards the lower median line (lml).A new long opportunity could be signalled by a consolidation above the median line (ml) or by a false breakdown with great separation below the immediate support levels.Looking to trade forex now? Invest at eToro!67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.