Forex Market: USD/MXN daily trading forecast

Yesterday’s trade saw USD/MXN within the range of 13.4720-13.5647. The pair closed at 13.5395, gaining 0.04% on a daily basis.

At 7:46 GMT today USD/MXN was up 0.08% for the day to trade at 13.5494. The pair touched a daily high at 13.5549 at 5:55 GMT.

Fundamentals

United States

The annualized index of consumer prices (CPI) in the United States probably decelerated to 1.6% in September, according to market expectations, from 1.7% in August. If so, this would be the third consecutive month of slowdown. In monthly terms, the CPI probably remained flat in September, following a 0.2% drop in the prior month, which has been the first in 16 months. In August prices of food and shelter rose, but the increases were more than offset by a decline in energy prices. The latter dropped at an annualized rate of 2.6% in August, while gasoline prices alone declined 4.1%.

The CPI is based on a basket of goods and services bought and used by consumers on a daily basis. In the United States the Bureau of Labor Statistics (BLS) surveys the prices of 80 000 consumer items in order to calculate the index. The latter reflects prices of commonly purchased items by primarily urban households, which represent about 87% of the US population. The Bureau processes price data from 23 000 retail and service businesses.

The CPI includes sales taxes, but excludes income taxes, costs of investments such as stocks and bonds and sales prices of homes.

The annualized Core CPI, which excludes prices of food and energy, probably remained unchanged at 1.7% in September. It is usually reported as a seasonally adjusted figure, because consumer patterns are widely fluctuating in dependance on the time of the year. The Core CPI is a key measure, because this is the gauge, which the Federal Reserve Bank examines in order to adjust its monetary policy. The Fed uses the core CPI, because prices of food, oil and gas are highly volatile and central bank’s tools are slow-acting. In case, for example, prices of oil surge considerably, this could lead to a high rate of inflation, but the central bank will not take action until this increase affects prices of other goods and services.

If the CPI tends to approach or comes in line with the inflation objective, set by the Federal Reserve and considered as providing price stability, or 2%, this will usually support demand for the US dollar. However, quite high rates of inflation (well above central bank’s inflation target) can be harmful to economy and as a result, this may lead to the loss of confidence in the local currency.

The Bureau of Labor Statistics is to release the official CPI report at 12:30 GMT.

Mexico

Mexican index of retail sales probably rose at an annualized rate of 2.7% in August, according to the median forecast by analysts. If so, this would be the fastest rate of increase since November 2012, when sales climbed 3.5% on annual basis. Monthly retail sales probably increased 0.2% in August, following another 0.4% climb in the prior month. If so, this would be the third consecutive month of gains.

Retail sales measure the change in the total value of inflation-adjusted sales at the retail level. It is the primary indicator for consumer spending, which itself accounts for a greater part of nations economic activity. Therefore, higher retail sales suggest accelerating economic activity, which is generally seen as having a bullish effect on the local currency. Lower retail sales, on the other hand, suggest that the economy is cooling, which is, in general, bearish for the peso. Mexicos National Institute of Statistics, Geography and Informatics (Instituto Nacional de Estadística y Geografía) will release its report on retail sales at 13:00 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 13.5254. In case USD/MXN manages to breach the first resistance level at 13.5788, it will probably continue up to test 13.6181. In case the second key resistance is broken, the pair will probably attempt to advance to 13.6715.

If USD/MXN manages to breach the first key support at 13.4861, it will probably continue to slide and test 13.4327. With this second key support broken, the movement to the downside will probably continue to 13.3934.

The mid-Pivot levels for today are as follows: M1 – 13.4131, M2 – 13.4594, M3 – 13.5058, M4 – 13.5521, M5 – 13.5985, M6 – 13.6448.

In weekly terms, the central pivot point is at 13.5256. The three key resistance levels are as follows: R1 – 13.6696, R2 – 13.8171, R3 – 13.9611. The three key support levels are: S1 – 13.3781, S2 – 13.2341, S3 – 13.0866.