Bank of Mexico may cut the rate
In this review, we will consider the chart of the euro against the Mexican peso. Is there a possibility for the EURMXN to rise?
Such a movement occurs when the euro strengthens and the Mexican peso weakens. The current account balance of Mexico has been negative for already 30 years. In the 4th quarter of 2018, the deficit was $5.08 billion. In the Eurozone, the current account balance is positive at nearly 20 billion euros per month. Such dynamics can contribute to the strengthening of the European currency against the Mexican peso. An additional negative factor for the peso may be the rate cut of the Bank of Mexico (8.25%) at its next meeting on March 28, 2019. Market participants estimate the likelihood of such an event at the level of 70%. In addition, the Mexican government is going to increase spending to provide financial assistance to the state oil company Pemex in the amount of $3.6 billion. Investors fear that this will not be enough amid its debt in the amount of $106 billion. In turn, the main risk for the euro is the launch of the new money emission for the TLTRO program. The ECB may report any details at its next meeting on March 7, 2019.
On the daily timeframe, EURMXN: D1 is correcting upwards within the wide neutral channel. A number of technical analysis indicators formed buy signals. The further price increase is possible in case of positive macroeconomic news in the EU and negative - in Mexico.
Summary of technical analysis
Position Buy
Buy stop Above 22
Stop loss Below 21.5
In this review, we will consider the chart of the euro against the Mexican peso. Is there a possibility for the EURMXN to rise?
Such a movement occurs when the euro strengthens and the Mexican peso weakens. The current account balance of Mexico has been negative for already 30 years. In the 4th quarter of 2018, the deficit was $5.08 billion. In the Eurozone, the current account balance is positive at nearly 20 billion euros per month. Such dynamics can contribute to the strengthening of the European currency against the Mexican peso. An additional negative factor for the peso may be the rate cut of the Bank of Mexico (8.25%) at its next meeting on March 28, 2019. Market participants estimate the likelihood of such an event at the level of 70%. In addition, the Mexican government is going to increase spending to provide financial assistance to the state oil company Pemex in the amount of $3.6 billion. Investors fear that this will not be enough amid its debt in the amount of $106 billion. In turn, the main risk for the euro is the launch of the new money emission for the TLTRO program. The ECB may report any details at its next meeting on March 7, 2019.
On the daily timeframe, EURMXN: D1 is correcting upwards within the wide neutral channel. A number of technical analysis indicators formed buy signals. The further price increase is possible in case of positive macroeconomic news in the EU and negative - in Mexico.
- The Parabolic Indicator gives a bearish signal. It can be used as an additional resistance level, which should be overcome before opening a buy position.
- The Bollinger bands have narrowed, which indicates low volatility. The lower Bollinger band is titled upward.
- The RSI indicator is above 50. It has formed a positive divergence.
- The MACD indicator gives a bullish signal.
Summary of technical analysis
Position Buy
Buy stop Above 22
Stop loss Below 21.5