USD/MXN: Short Review & Forecast
The USD has strengthened against most currencies based on positive economic news and increased probability for a new rate hike this year.
The U.S. dollar strengthened against most currencies this week. At the same time, the tragic event in Las Vegas wasn't noticed by investors amid positive economic news, which increases the probability of a rate hike in the United States. FED Chairman Janet Yellen also said that the Central Bank is not going to refuse one more rate hike which was scheduled this year. In addition, the dollar received support from the tax reform which was promised personally by Donald Trump. Also, the USD has been supported given the probability of a change of the head of the Federal Reserve. Analysts forecast that Kevin Warsh will be chosen as new FED Head. It's known that he is a supporter of a strong dollar and tight monetary policy. Consequently, there are perspectives for further strengthening of the dollar.
Data about the Mexican economy also pleased investors this week. The business activity index amounted to 52.8 points in September, surpassing investors' expectations. This is a record level in recent years, but the decision of the Central Bank of Mexico to keep the rate at the same level didn't support significantly the MXN compared to the strong dollar. So, the rates continue in the frames of a downward trend, although the resistance line has been gradually shifting upwards for the last several months, indicating a weakening of the current trend. However, at the moment the most optimal would be the deals on the trend, which is confirmed unanimously by the MACD and Stochastics oscillators.
