In today’s comprehensive EURMXN forecast, we will first examine the current economic conditions in Mexico. Then, we will meticulously delve into the technical analysis of the EUR/MXN pair.
The Momentum Behind the Peso 5-Day Surge
Bloomberg—The Mexican Peso has strengthened significantly against the USD, reaching 17.3 per USD in November. This growth marks a consistent five-day surge. The widespread belief that the U.S. Federal Reserve might halt its rate hikes is a key factor driving this rally. This anticipation is rooted in various economic indicators from the U.S. that hint at a slowing economy. These include a decreased Producer Price Index (PPI) and an uptick in unemployment claims, suggesting reduced economic activity.
Inflation in the United States appears to be easing, as shown by the slowing pace of import and export prices. Recent Consumer Price Index (CPI) numbers also indicate reduced 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 maintained its benchmark interest rates at 11.25%. This decision in their latest meeting reflects a commitment to a tight monetary policy. While October’s inflation figures in Mexico decreased, 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 the 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 strongly indicate 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 the 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, if managed prudently, this situation can be more beneficial than detrimental to the economy, fostering a balance between inflation control and economic growth.
EURMXN Technical Analysis and Forecast
The EURMXN currency pair has recently descended below the Ichimoku Cloud, indicating a potential bearish trend. It stabilizes below the 61.8% Fibonacci retracement level, further suggesting a consolidation phase. The Relative Strength Index (RSI) lands below the median line, reinforcing the bearish outlook. Analysts at FxNews recommend considering short positions as long as the EURMXN remains under the cloud.
In this scenario, the bearish trend could target the November low, around the 18.5 mark, as a potential support level.
J.J Edwards is a finance expert with 15+ years in forex, hedge funds, trading systems, and market analysis.
