The Mexican peso ends the day with losses, falling more than 3% for the week

The Mexican peso gained 0.90% on Friday, but gave up gains amid a weaker U.S. dollar.
The U.S. dollar index hit a two-month high before falling to 103.48 on Friday, down 0.23%.
Chinese stimulus measures provided short-term support for the peso.

The Mexican peso remained powerful against the U.S. dollar on Friday, but pared earlier gains that saw the emerging market currency gain more than 0.90%. US economic data released during the week justified the Federal Reserve’s (Fed) gradual approach to easing policy, strengthening the dollar and weighing on the peso. The USD/MXN rate is 19.85, up 0.20%.

Wall Street is trending higher, supported by Thursday’s solid report on U.S. retail sales and unemployment claims. The data boosted the dollar, which hit a two-month high against a basket of six currencies known as the US dollar index (DXY). DXY reached 103.87 before falling to 103.48 at the time of writing.

Meanwhile, the U.S. economic report included building permits and home starts in September, both of which worsened compared to August data.

Earlier, the Mexican peso gained ground on news from China that the People’s Bank of China (PBoC) would provide further stimulus to the economy, aimed at easing housing market woes and boosting domestic consumption. Prior to this announcement, China revealed that its economy was growing at an annual rate of 4.6% compared to Q3 2023.

Still, the Fed is expected to cut interest rates by 25 basis points at its November meeting. Rates remained at 92.9%, according to CME FedWatch Tool data.

Daily Market Movement Summary: Mexican Peso falls as USD/MXN rises above 19.90

Earlier this week, the Mexican peso hit a five-week low and the USD/MXN pair hit a high of 20.02.
The International Monetary Fund (IMF) forecast that Mexico’s economy will grow by 1.5% in 2024, which is less than the previous forecast. The IMF estimates a deeper economic slowdown next year, estimating GDP growth at 1.3%, and forecasts inflation will reach Banxico’s target of 3% in 2025.
The IMF said the recent judicial reform creates “serious uncertainty about the effectiveness of contract enforcement and the predictability of the rule of law.”
Banxico research revealed that economists estimate the central bank will cut interest rates by 50 basis points by the end of the year.
U.S. building permits in September fell 2.9%, from 1.47 million to 1.428 million, with a missing estimate of 1.46 million.
September home construction starts decreased by -0.6%, from 1.361 million to 1.354 million.
Data from the Chicago Board of Trade via the December Federal Funds Rate Futures show that investors estimate the Fed’s easing of monetary policy by the end of the year will be 48 basis points.

USD/MXN Technical Outlook: Mexican Peso Falls as USD/MXN Rates Above 19.80

The USD/MXN pair is trending higher despite falling to a two-day low of 19.64, which witnessed the emergence of buyers, pushing the exchange rate above the opening price. The relative strength index (RSI) suggests that bulls are dominant, which could pave the way for further gains.

Once USD/MXN breaks above the October 17 high of 20.02, the next resistance level will be the year-to-date high of 20.22. In case of further strengthening, the USD/MXN rate will move towards 20.50 and then raise to 21.00.

Conversely, if USD/MXN breaks below today’s low of 19.64, the next stop would be the October 10 intraday high of 19.61. In case of further weakening, the next floor will be the October 4 low of 19.10 before the 7:00 p.m. test.