The USD/MXN exchange rate retreated for the second consecutive day as traders waited for the upcoming Federal Reserve minutes and US and Mexico consumer inflation reports. It retreated to a low of 17.78 on Tuesday, down from the year-to-date high of 18.20.
FOMC Minutes and US and Mexico Inflation Reports
The USD/MXN pair has pulled back in the past few days as investors waited for the final decision by Donald Trump on attacking Iranian infrastructure like bridges and power plants.
There is a fear that the attack, if it happens, will lead to retaliation, which will lead to higher crude oil prices. Indeed, Brent and the West Texas Intermediate (WTI) have jumped to $112 and $115, respectively.
The US and Mexico will publish their inflation numbers later this week, which will provide more information about the impact of the ongoing war on inflation.
A report by the Mexican statistics agency is expected to show that the headline Consumer Price Index (CPI) rose to 4.62% in March from the previous 4.02%. Core inflation, which excludes the volatile food and energy prices, is expected to come in at 4.46% from the previous 4.5%.
US inflation is also expected to have rebounded in March, with the average estimate showing that the headline CPI rising to 3.4% from 2.4% in February. Core inflation is expected to come from 2.5% to 2.7%.
The US will also publish more data this week. For example, the Bureau of Economic Analysis (BEA) data is expected to show that the economy expanded by 0.7% in Q4, a sharp deceleration from 4.4% in the third quarter.
The other key USD/MXN news will be the upcoming FOMC minutes, which will come out on Wednesday. These minutes will provide more information about the last meeting and what officials deliberated.
USD/MXN Technical Analysis
The daily timeframe chart shows that the USD/MXN exchange rate jumped from a low of 17.07 in March to a high of 18.20 in March.
A closer look shows that the pair is oscillating at the 100-day Exponential Moving Average (EMA). Also, the pair has moved below the Major S&R Pivot Point of the Murrey Math Lines tool.
Most importantly, it has formed a rising wedge pattern and has already moved below the lower side, confirming the bearish breakout.
Therefore, the pair will likely continue falling, potentially to the Strong, Pivot, Reverse level of the Murrey Math Lines tool at 17.57. A drop below that level will point to more downside, potentially to 17.00.