Bank of Mexico hikes rates by 75bps, as expected. USD/MXN at lowest level since March 2020.

The Bank of Mexico stuck to the script and hiked rates by the same amount as the US Federal Reserve, 75bps, to bring its overnight rate to 10%. In doing so, Banxico has now hiked rates by 75bps for the 4^th consecutive time, just as the US Fed has done. There was 1 dissenter who only voted for a 50bps increase. Banxico marginally downgraded its forecasts for short-term headline inflation to 8.4%, while it increased its forecasts for core inflation. Inflation is now expected to converge to the 3% target in the third quarter of 2024 vs a previous target of the first quarter 2024.

On a weekly timeframe, USD/MXN has been moving lower since making highs in April 2020 near 25.7836. The pair has been in a descending triangle formation with a base between 19.5491 and 19.8917. Each time price would hit the support area, it would bounce towards the downwards sloping trendline of the triangle, making a lower high each time. Price only pierced through this zone 2 times, on May 30^th and June 6^th, however it bounced back into the triangle both times. On October 21^st, USD/MXN fell below the 20.0000 level and hasn’t returned to that level since. Today, after the weaker than expected CPI data from the US, USD/MXN continued to move lower and took out the May 30^th lows at 19.4135, reaching an intraday low of 19.3347. If the pair closes below the May 30^th low of 19.4136, there is room for price to fall to 18.5234, the lows from February 2020.

Source: Tradingview, Stone X

On a daily timeframe, the aggressiveness of Banxico shows that USD/MXN continues to hold below the 19.4135 level. If it continues lower, first support is at the 161.8% Fibonacci extension from the lows of September 12^th to the highs of September 28^th, near 19.2417. There isn’t any major support below there until the previously mentioned February 2020 lows at 18.5234, then the bottom trendline of the shorter-term timeframe near 18.3231. However, if USD/MXN bounces, the first resistance is at the previous lows of 19.4136, then the highs from November 9^th at 19.6320. Above there, price can move to the lows of September 12^th at 19.7530.

Source: Tradingview, Stone X

If the US continues to have lower inflation readings, the FOMC may only hike 50bps at the December meeting. However, will Banxico follow with a hike of only 50bps at its next meeting on December 15^th (a day after the FOMC meeting)? It may depend on whether Mexico’s inflation increases or falls in November.

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

StoneX Europe Limited is registered with the German Federal Financial Supervisory Authority (BaFin). BaFin registration ID: 10160255

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

The statistical data and the awards received refer to the Global FOREX.com brand.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Additionally, StoneX Europe Ltd is allowed to provide Investment and Ancillary Services to the following non-EU jurisdiction: Switzerland.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

Tied Agent Information: KQ Markets Europe Ltd with Company No. HE427857.
Address: Athalassas 62, Mezzanine, Strovolos, Nicosia Cyprus.
Services Provided: Reception and Transmission of Orders.
Commencement Date: 06/12/2022
Website: KQ Markets - CFD Trading | KQ Markets

We may pay inducements, such as commissions or fees, to affiliates or third-party introducers for referring clients to us. This is in line with regulatory guidelines and fully disclosed where applicable.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.