Peso Gains, USDMXN Outlook: 12/8

by on December 9, 2013 4:20 am GMT

The Mexican peso has been gaining on the dollar in the wake of a new energy bill that will overhaul the Mexican energy industry. Also, Banco de Mexico decided to keep lending rates the same as the previous month at 3.5 percent. The central bank cut the benchmark rate  in consecutive months to historical lows.

The economy is much slower than the last couple of years of growth outlook. In August 2010, Mexico reported a year-over-year GDP of 7.6 percent. In contrast, this November’s GDP figure came in at 1.3 percent, which beat the one percent forecast. Exports are picking up, but there is little internal demand.

“Indicators of private consumption and investment [particularly in the construction sector] don’t show clear signs of recovery. On the other hand, government spending has accelerated,” said central bank policy makers.

The Mexican peso is closely tied to the risk sentiment of the financial markets and the Federal Reserve’s monetary policy.

The USDMXN is looking to head lower as the peso continues to climb. The 90-day 4H intraday chart is showing break of the 61.8 percent Fibonacci level. Support is at 12.8555, while a downside target of 12.8115 is projected.

Resistance will remain at to 61.8 percent level, while price action resistance is located at 12.9500. USDMXN has a weekly volatility of 368 pips.

4H Chart of USDMXN

4H Chart of USDMXN