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Despite Fed comments, USD/MXN maintains its 20 cents range before NFP data

·2 min read

The US dollar fell against the Mexican peso on Thursday as investors awaited the US employment report scheduled for release on Friday. Before, the dollar’s bulls welcomed comments from two Federal Reserve members. However, the movement was contained.

The USD/MXN performed its second negative day in a row on Thursday after testing the 20.0000 area on Tuesday and Wednesday. In this way, the pair respected its 20 cent range between 19.8000 and 20.0000.

Daly and Clarida signal tapering measures

San Francisco Federal Reserve president Mary Daly and Federal Reserve vice president Richard Clarida both predicted that the Federal Reserve would be able to cut bond purchasing programs later this year or early in 2022 and to increase interest rates by 2023.

“I’m looking for continued progress in the labor market, continued putting COVID behind us, rising vaccination rates, the things that are so fundamental to us saying that the economy has achieved that metric of substantial further progress,” Daly said in a Wednesday interview. “Right now my modal outlook is that we will achieve that metric later this year or early next.”

According to Daly, tempering some economic activity would not derail the recovery in the United States.

Also on Wednesday, Clarida said the Fed would reach its targets by the end of 2021 and would begin raising rates in 2023.

“Given this outlook and so long as inflation expectations remain well anchored at the 2% longer-run goal … commencing policy normalization in 2023 would, under these conditions, be entirely consistent with our new flexible average inflation targeting framework,” Clarida said in a virtual interview.

USD/MXN waits for developments

In that framework, the USD/MXN is trading inside a 20 cents range between 19.8000 and 20.0000. Following the comments from Federal Reserve officials, the unit rose to test the 20.0000 area, but after the dust settled, it started to consolidate levels again.

The USD/MXN is currently trading at 19.9000, which is down by 0.08 percent today. Investors are now waiting and seeing what the nonfarm payroll data will reveal on Friday.

For day traders and short-term strategies, long opportunities are seen at the 19.8000 support, while the 20.0000 area is seen as a selling area.

There are two resistance levels to the upside: the 200-day moving average at 20.1500 and the 21 July high of 20.2500. Supports are located at 19.8000, 19.7000, and 19.6000.

This article was originally posted on FX Empire