USD/MXN Weekly Analysis & Trade Setup (April 14–19)

USD/MXN Weekly Analysis & Trade Setup (April 14–19)

Macro Overview: Dovish Banxico + Global Risk Tensions vs. Weakening USD

USD/MXN enters the week in a delicate balance between domestic dovish monetary policy from Banxico and external USD weakness triggered by China’s retaliatory tariffs and falling U.S. inflation metrics. The pair closed below the critical 20.30 support level after Banxico minutes confirmed the board sees increased economic slack and downside inflation risks, suggesting more rate cuts ahead.

Despite the dovish Banxico tone, MXN strength is persisting, bolstered by:

• The orderly and improving trading conditions in the peso, noted by Banxico.

• Stronger-than-expected Mexican industrial production in February.

• A sharp deterioration in U.S. consumer sentiment and inflation expectations, with U.S. Core PPI easing slightly but still above 3%.

Meanwhile, the USD remains under pressure, with the DXY closing under 100 for the first time since 2021 amid trade war escalation and rising recession fears. Although U.S. Treasury yields remain elevated, they failed to support the greenback last week—suggesting the market narrative has turned decisively risk-off, anti-USD.

USD/MXN Technical Outlook

USD/MXN broke below its short-term ascending trendline and key moving averages near 20.33–20.36. This technical breach adds weight to the peso’s strength and makes the pair vulnerable to further downside—particularly if the 20.30 level is breached and sustained.

Key Levels:

• Support:

  • 20.30 – Horizontal support (recent breakdown area)

  • 20.00 – Psychological round number and prior support

  • 19.83 – 200-day SMA

  • 19.50 – Next major technical pivot if selling accelerates

• Resistance:

  • 20.50 – Reclaiming this would negate immediate downside risks

  • 20.75 – 38.2% Fib retracement

  • 21.00 – Psychological resistance and key resistance zone

  • 21.28 – YTD high

Trade Setups for the Week

Scenario 1: Bearish Momentum Continuation

• Setup: Sell USD/MXN on break and close below 20.30

• Entry: 20.27 (current price) or sell on retest of 20.30–20.33

• Target: 20.00, then 19.83

• Stop: 20.55

• Rationale: Break below 20.30 support confirms bearish continuation amid dovish Banxico and broad USD weakness.

Scenario 2: Range Rebound Trade (Short-Term Bullish Bounce)

• Setup: Buy USD/MXN near 20.00 psychological support

• Entry: 20.03–20.10

• Target: 20.30, then 20.50

• Stop: 19.83

• Rationale: Risk-reward favors a bounce play near 20.00 with tight stops, especially if DXY stabilizes early in the week.

Scenario 3: Breakout to the Upside

• Setup: Buy USD/MXN on confirmed breakout above 20.75

• Entry: 20.77

• Target: 21.00, then 21.28 (YTD high)

• Stop: 20.50

• Rationale: A sustained break above 20.75 on renewed USD demand or a shift in sentiment could accelerate upside momentum.

Bias for the Week Ahead: Bearish USD/MXN (MXN Strength Favored)

Despite Banxico’s easing bias, the combination of:

• improving Mexican economic data,

• contained inflation,

• resilient MXN market structure,

• and broad-based USD weakness due to deteriorating U.S. sentiment and escalating trade tensions, all favor continued MXN appreciation in the near term.

However, risk-off sentiment from trade war headlines or an unexpected hawkish tilt from the Fed could still generate short-term USD demand spikes.

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