LATAM: Pressure on Equities Prompts MXN Reversal, COP & PEN Underperform
- Pressure on equities across the US session has broadly weighed on Latin American currencies, with the most notable move being a solid 0.5% reversal higher for USDMXN from 18.3689 lows to current spot levels around 18.46. Note that resistance is at the 50-day EMA, at 18.5201, and a clear break of it would signal scope for a stronger short-term recovery and open 18.8637 initially, the Sep 2 high.
- Major indices in the US are exhibiting steep losses, led by the Nasdaq falling 1.6%, likely assisted by the latest headlines that the US is considering curbs on exports to China made with US software.
- Dented risk sentiment has allowed the likes of COP and PEN to consolidate declines on the session, which have both been negatively impacted by domestic newsflow this week. In similar vein, USDBRL tracks 0.33% higher on the session as traders assess the likelihood of the upcoming Trump/Lula meeting and whether the relationship between the two governments can be improved.
- Over the next two days. Inflation data for both Mexico and Brazil will be of interest, while global markets will be firmly focussed on the upcoming US CPI report on Friday, potentially the year’s last ‘reliable’ CPI read.
- Looking further ahead, Argentina’s mid-term elections remain a key focus for the region this weekend. Waning popularity for President Milei and what seems like US aid proposals that appear tied to his mid-term performance are likely to keep uncertainty surrounding local assets very high. On the calendar, Argentina economic activity data is due at the top of the hour.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
EURUSD TECHS: Monitoring Support
- RES 4: 1.2063 2.236 proj of the Feb 28 - Mar 18 - 247 price swing
- RES 3: 1.2000 Round number resistance
- RES 2: 1.1923 2.00 proj of the Feb 28 - Mar 18 - 247 price swing
- RES 1: 1.1919 High Sep 17 and key short-term resistance
- PRICE: 1.1796 @ 18:54 BST Sep 22
- SUP 1: 1.1726/1667 Low Sep 22 / 50-day EMA
- SUP 2: 1.1574 Low Aug 27
- SUP 3: 1.1528 Low Aug 5
- SUP 4: 1.1392 Low Aug 1 and bear trigger.
The trend theme in EURUSD remains bullish and S/T weakness is considered corrective. Resistance at 1.1743, the Aug 22 high, has recently been cleared, reinforcing a bull cycle. Gains in the first half of last week resulted in a climb above 1.1829 the Jul 01 high and bull trigger. Clearance of this hurdle confirms a resumption of the primary uptrend and opens 1.1923 next, a Fibonacci projection. Support to watch is 1.1667. the 50-day EMA.
GBPUSD TECHS: Monitoring Trendline Support
- RES 4: 1.3893 1.236 proj of the Aug 1 - 14 - Sep 3 price swing
- RES 3: 1.3789 High Jul 1 and key resistance
- RES 2: 1.3753 High Jul 2
- RES 1: 1.3661/3726 High Sep 18 / 17
- PRICE: 1.3517 @ 19:01 BST Sep 22
- SUP 1: 1.3453 Low Sep 22
- SUP 2: 1.3441 Trendline support drawn from the Aug 1 low
- SUP 3: 1.3333 Low Sep 3 and a key support
- SUP 4: 1.3282 Low Aug 6
A bullish theme in GBPUSD remains intact and the move down from last Wednesday’s high is considered corrective - for now. However, the pair has traded through the 50-day EMA and this signals scope for a deeper retracement. The next support to watch lies at 1.3441, a trendline support drawn from the Aug 1 low. For bulls, a resumption of gains would refocus attention on key short-term resistance at 1.3726, the Sep 17 high.
US: Republican Pessimism Over Direction Of Country Increases
A survey from AP-NORC has found that pessimism among Republicans about the direction of the country has spiked for the first time since President Trump’s second inauguration. “In June, 29% of Republicans said the country was heading in the wrong direction. That number is now 51%.”
- AP notes, “Among Republicans, there are notable differences by age and gender: those under 45 are more likely than older Republicans (61% vs 43%) to say the country is off track, and Republican women are more likely than men (60% vs 43%) to share that view.
- AP adds, “Views on Donald Trump’s handling of the issues are highly partisan. Trump’s best issues are border security (55% approve) and crime (46%). Roughly 4 in 10 approve of his handling of health care, trade, the economy, the conflict between the Israelis and Palestinians, foreign policy, and immigration. Overall, 39% of adults approve of the way Trump is handing his job as president and 60% disapprove.”
- Silver Bulletin notes that while "Trump’s overall approval rating looks about the same today as it did in mid-July, his approval on issues related to the economy has fallen more consistently."
- Silver Bulletin's Eli McKown-Dawson notes, "approval of how Trump is handling inflation has fallen so rapidly that I've had to extend the y-axis on our issue approval chart below -30."
Figure 1: “Generally speaking, would you say things in this country are heading in the…?” (% saying wrong direction)
Source: AP-NORC
