EURMXN Forecast – November-16-2023


In today’s comprehensive EURMXN forecast, we will first scrutinize the current economic conditions in Mexico. Following that, we will meticulously delve into the details of the technical analysis pertaining to the EUR/MXN pair.

The Momentum Behind the Peso’s Strengthening

Reuters — The Mexican Peso has seen significant strengthening against the USD, reaching 17.3 per USD in November. This growth marks a consistent five-day surge. A key factor driving this rally is the widespread belief that the U.S. Federal Reserve might halt its rate hikes. This anticipation is rooted in various economic indicators from the U.S. that hint at a slowing economy. These include a decrease in the Producer Price Index (PPI) and an uptick in unemployment claims, both suggesting reduced economic activity.

Inflation in the United States appears to be easing, as shown by the slowing pace of both import and export prices. Additionally, recent Consumer Price Index (CPI) numbers also indicate a reduction in inflationary pressures. These changes in the U.S. have a ripple effect on currencies like the Mexican Peso, often strengthening them against the dollar.

Despite the positive trends in currency strength, the Bank of Mexico has chosen to maintain its benchmark interest rates at a high of 11.25%. This decision, taken in their latest meeting, reflects a commitment to a tight monetary policy. While October’s inflation figures in Mexico showed a decrease, with headline and core inflation at 4.26% and 5.5% respectively, the bank’s target of 3% inflation is not anticipated to be achieved until 2025. This cautious approach is due to potential risks of inflation increasing again.

Encouragingly, business confidence and the Manufacturing Purchasing Managers’ Index (PMI) in Mexico have risen to 54 and 52.1, respectively, in October. These figures are a strong indication of the underlying resilience and robustness of the Mexican economy.

The strengthening of the Mexican Peso, coupled with the Bank of Mexico’s firm stance on interest rates, has a dual impact on the economy. On one hand, a stronger peso can boost consumer confidence and reduce the cost of imports, aiding in controlling inflation. On the other hand, it might pose challenges for exporters as their products become more expensive in foreign markets. Overall, this situation, if managed prudently, can be more beneficial than detrimental to the economy, fostering a balance between inflation control and economic growth.

EURMXN Forecast: A Technical Analysis

The EURMXN currency pair has recently descended below the Ichimoku Cloud, indicating a potential bearish trend. Currently, it is stabilizing below the 61.8% Fibonacci retracement level, further suggesting a consolidation phase. The Relative Strength Index (RSI) is observed lingering below the median line, reinforcing the bearish outlook. Analysts at FxNews recommend considering short positions as long as the EURMXN remains under the cloud.

EURMXN Forecast - November-16-2023

EURMXN Forecast – 4H Chart

In this scenario, the bearish trend could target the November low, around the 18.5 mark, as a potential support level.

  • 16 November 2023
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