MEXICO: Activity, Inflation and Trade Data Precede Banxico Next Week
Jun-20 10:38
- Following the return of the US markets after the Juneteenth holiday and other national holidays across the region, the calendar remains light to finish the week in Mexico. The peso trades on a firmer footing, in line with the weaker dollar indices as the focus shifts to a busy week ahead.
- Retail sales, economic activity, inflation and trade data will all precede the June Banxico meeting next week. Despite both headline and core inflation edging higher in May, the Banxico committee look likely to continue its easing cycle, with another 50bp cut of the overnight rate to 8.00%. This would be in line with most recent communication that stated the board would consider adjusting the monetary policy stance “in similar magnitudes” ahead. A strong peso and ongoing concerns around the growth trajectory are supportive of further easing.
- However, the probability of a dissenting vote/view has risen following recent headlines from Deputy Governor Heath, who suggested that it may be prudent to pause the easing cycle to assess whether the projected inflation slowdown actually materialises in Q3.
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OUTLOOK: Price Signal Summary - USDJPY Reversal Extends
May-21 10:36
- In FX, EURUSD is trading higher this week, extending the bounce that started May 12. Trend conditions remain bullish and moving average studies are in a bull mode position, highlighting a dominant uptrend. The latest recovery suggests the Apr 21 - May 12 correction is over. Sights are on 1.1381 next, the May 2 - 6 high. Key support to watch lies at 1.1109, the 50-day EMA. A break of this level would instead signal scope for a deeper retracement. Initial support at the 20-day EMA lies at 1.1236 20-day EMA.
- GBPUSD has pierced key resistance and the bull trigger at 1.3444, the Apr 28 / 29 high. A clear break of this hurdle would confirm a resumption of the uptrend and signal scope for an extension towards 1.3510, a 1.236 projection of the Feb 28 - Apr 3 - 7 price swing. Medium-term trend signals highlight a dominant uptrend - moving average studies are in a bull-mode position. Key support to watch is 1.3137, the 50-day EMA. First support lies at 1.3282, the 20-day EMA.
- USDJPY is trading lower today extending the reversal that started May 12. The pullback signals the end of the corrective cycle since Apr 22 and marks a resumption of the downtrend. A continuation lower would expose 142.36, the May 6 low. Note that the 20-day EMA, at 145.11, has been cleared, strengthening a bearish theme. Key short-term resistance has been defined at 148.65, the May 12 high. Initial firm resistance is 146.16, 50-day EMA.
