Today’s data from Mexico gave the peso a small boost despite bullish inflation data from the US.

Unemployment in Mexico showed a decline to 2.3% from last month’s 2.5%. A clear indicator of an expanding economy. The balance of trade also gave a bullish reading increasing to $2.10 billion from -$0.58 billion a month earlier.

The data pushed the Mexican Peso higher by 0.8% within a couple of hours after the release. Half an hour after the Mexican data, we also got PCE data from the US, where 3 of the 6 indicators showed positive surprises. Indicating how sticky inflation still in in the US.

However, despite the bullish data for the US the peso maintained the ground gained after figures from Mexico. And continued to rally throughout the trading session. The long-term outlook for the USD/MXN still looks bullish.

Mainly due to the tightening interest rate differential, the market is expecting the Fed to keep interest rates on hold for longer. While expectations for Banxico see their rates between 8.5% and 9.5% by year end.

Basically, the Mexican central bank has a lot more to do by year end than the Fed. Currently the central bank rate stands at 11%. Lower interest rates from Banxico should put a lot of pressure on the peso, at least until we get a sense of lower rates happening soon in the US.

Technical View

The weekly chart below shows the USD/MXN in a long-term bear market. This week’s candle is about to close at levels that would show the start of an Evening Star formation. To finalize the pattern, next week’s candle would need to be a red one.

Last week’s candle is also a bearish one, with an extremely long upper wick. From that Friday’s candle we got a bearish one candle formation, which is still marking the market. We’ll see what happens next week, but the long-term bearish trend is still intact for now.

This week’s high met topped at 17.37 (red line) and if the market were to rally again the first resistance would be at that level. On the downside, the market will find support at 16.99 (blue line), if that breaks the next stop would be at 16.62 (green line).