The USD/MXN pair remained in a relatively tight range after the relatively weak Mexican business activity data and as the price of crude oil jumped. It is trading at 20.1100, where it has been in the past few weeks.
Oil prices jump
Mexico is a leading producer of crude oil. As a result, the country tend to do well when oil prices rise because it means more demand for the peso.
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Oil prices jumped sharply in the overnight session as investors priced in more demand. The price of Brent, the global benchmark, rose to almost $80 per barrel. The West Texas Intermediate (WTI) price also rose to more than $76.
This trend is mostly because of the relatively higher demand as the global economy reopens. In recent reports, OPEC and the International Energy Agency (IEA) said that demand is set to rise above its pre-pandemic levels next month. At the same time, OPEC and its allies are set to increase oil production only gradually.
The USD/MXN pair also reacted to the relatively weak data from Mexico. The numbers showed that economic activity increased by just 0.5% in July after falling by 1.1% in the previous month. This activity rose by 7.10% on a year-on-year basis. At the same time, the country’s trade deficit widened to more than $3.9 billion in August.
US consumer confidence data
Looking ahead, the pair will react to the upcoming American consumer confidence data. The numbers, by the Conference Board, are expected to show that confidence rose modestly in August. This is an important number because it provide more cues about the state of the economy.
The pair will also react to the upcoming US GDP numbers scheduled for Thursday and the upcoming testimony by the Federal Reserve Chairman. He will likely talk about last week’s interest rate decision and the actions the bank will take.
Most importantly, the pair will react to the ongoing deliberations about the US debt ceiling. Democrats and Republicans have remained at odds about whether the country should suspend the debt ceiling. On Monday, Republicans blocked a Democrats bill that would fund the government and suspend the debt ceiling.
USD/MXN forecast
The daily chart shows that the USD/MXN pair has remained in a tight range recently. It has found a lot of support at 19.76 and resistance at 20.1750. It is along the 25-day moving average while the Stochastic oscillator is slightly below the overbought level. Therefore, the pair will likely remain in this range in the near term.
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