MEXICO: USDMXN Reverses Powell-Inspired Selloff, Rally Lacking Momentum
Aug-27 10:36
- Consolidating weakness for European equities on Wednesday is favouring the dollar, helping USDMXN to rise to fresh highs for the week in recent trade. The pair has now fully reversed the Powell induced selloff to trade back at 18.7250, although spot remains well contained within the most recent 18.50-18.85 range.
- Given the solid support seen into 18.50, the short-term focus will be on the topside and for any signs of a stronger recovery. Clearance of the 50-day EMA, at 18.8165, would be required to undermine the bearish trend.
- Renewed dovish leanings from the Fed are being offset by the continued dovish rhetoric from the Banxico committee. Overall, this is allowing USDMXN to consolidate at depressed levels, having fallen just over 10% in 2025. Banorte recently commented that USDMXN implied volatility remains subdued, suggesting the market is relatively comfortable with the near-term risk outlook. They expect a trading range of 18.40-18.80 this week.
- On the data front, July trade balance is expected to show a surplus of 750m, a slightly wider surplus than in June. Elsewhere, Brazil Vice President Geraldo Alckmin visits Mexico today to continue building on talks between the administrations of President Sheinbaum and her counterpart Luiz Inacio Lula da Silva.
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OUTLOOK: Price Signal Summary - Gold Remains Above Support
Jul-28 10:36
- On the commodity front, Gold has pulled back from its Jul 23 high. Short-term weakness is considered corrective and a bull cycle that started Jun 30 remains intact. Resistance at $3395.1, the Jun 23 high, has recently been cleared. A continuation higher would open $3451.3, the Jun 16 high. Note that moving average studies are in a bull-mode position highlighting a dominant uptrend. An initial firm support to watch is 3282.8, the Jul 9 low.
- In the oil space, a bearish theme in WTI remains intact and the shallow recovery since Jun 24 still appears corrective. The sharp reversal from the Jun 23 high continues to highlight scope for an extension lower. Support to watch is the 50-day EMA, at $64.77. The average has been pierced, a clear break of it would expose $58.17, the May 30 low. On the upside, initial resistance to watch is $69.41, the 50.0% retracement of the Jun 23 - 24 high-low range.
US TSY FUTURES: CFTC CoT Shows Asset Managers & Funds Trimming Exposure
Jul-28 10:33
The latest CFTC CoT report revealed that asset managers trimmed net longs across all contracts in the week ending July 22, shedding just under $25mln of DV01 equivalent exposure across the curve. The cohort remains net long across the curve.
- Leveraged funds lightened their net short exposure, trimming existing shorts in all contracts outside of UXY (where they added to their net short). Overall exposure was reduced by ~$14mln DV01 equivalent. The cohort remains net short across the curve.
- Broader non-commercial participants reduced net shorts in TU, FV, TY & US futures, while adding to net shorts in UXY & WN futures. The cohort remains net short across the curve. See table below for further details.
Source: MNI - Market News/CFTC/Bloomberg Finance L.P.
EUR: Extending broader lows
Jul-28 10:30
- The EUR continues to dip lower against the USD, CAD, AUD, NOK, GBP, CNH, and JPY.
- Some of the earlier moves have been a function of the Dollar strength in early trade, although some market participants are still finding the extend of the USD bid at time perplexing.
- The pull back lower in EGB Yields and the fade off the high in European Equities have kept the lid on the EUR.
- Small supports in EURUSD are seen at 1.1631 and 1.1616.
