The Mexican Peso (MXN) continues to gain ground against the US Dollar on Wednesday after the release of the US CPI. Also, the Bank of Mexico will be announcing its policy decision later today with chances of a rate cut.
Right now, the Mexican Peso (MXN) is trading near 20.50, with the next resistance at 20.70. On the way down, the nearest support is 20.30 and then 20.05.
The US inflation report for October was in line with the forecasts. That's why everyone is optimistic that the Fed will likely lower the rate at the next meeting. As of now, the odds of a 25 rate cut by Fed in December is sitting at 82%.
Meanwhile, Banxico is expected to lower the rate by 0.25%. If that happens, the interest rate in Mexico will go down to 10.25% only.
This will further reduce the attractiveness of the MXN against the US Dollar. In that case, the USD/MXN pair might change directions and try to cross the 20.80 resistance.
Recently, Fed Logan talked about how they need to move away from the restrictive policy. She also added that it would be too soon to say how many rate cuts are needed.
Besides Banxico's decision, other high-volatility events are also lined up. Including the Fed speakers, PPI, and the Retail Sales data.
The direction bias of USD/MXN is still tilted on the upside. This comes even after the failure to cross the 20.69 level. But once this hurdle is cleared, the next level to watch will be 21.00 and then 21.46.
On the other hand, the 20.50 remains a key level for the USD bulls and will be defending the next level at 20.00. Beyond that lies the 50 SMA, which is located at 19.73 and is a solid dynamic resistance.
According to experts, the 19.23 is also a strong support but the USD/MXN is highly unlikely to reach that low.