The peso gained more than 6 cents, from its tentative high, against the US dollar. Doing so on a day when most currencies fell.

The USD/MXN gained 0.35% today, while other Latin American currencies fell against the dollar. Such as the Brazilian real, losing 0.17% and the Chilean Peso losing 0.20% on the day. The basket index of G7 countries DXY showed the US dollar was up 0.06% on the day after being down 0.20%.

The US dollar has benefitted in a change of perception in just how quick the Fed might change it stance on monetary policy. Recent data has shown the economy is still ticking over and price growth is no longer rising rapidly.

The general consensus then turned to the fact that the Fed had plenty of room to lower interest rates. However, it seems the consensus is ephemerous and is in reality much more conditioned by macro fundamentals.

Other countries are struggling to maintain the GDP growth rate experienced in the US and the interest rate differential clearly favors the US currency. While in Mexico economic expansion may be slower than the US, there is a much larger interest rate difference.

The last cut in rates by Banxico will probably mean another is not just around the corner. The central bank’s next meeting is May 9, and the general consensus is for them to leave rates on hold at 11%.

The perception then is that Banxico is likely to longer to cut rates and has further to go than the Federal Reserve.

Technical View

The USD/MXN day chart below shows this pair getting closer to a major support area of 16.6245 (black line), which was set by a dip to that level last July 2023. That was the low after a slide from 25.7782 which started in April 2020.

If that support level were to break the next support level is close at 16.3970. Another major area which was the support zone during a correction in the 2015 rally for this FX pair. The market made 5 unsuccessful attempts to break this level over 11 weeks.

To the upside the market will find the first hurdle at 16.7907(red line), which was set by a previous low in January. The second hurdle will come at 16.996 area (blue line), which was set by a low in September 2023. But is also a psychological hurdle represented by the 17 handle with 4 straight zeros after it.