USD/MXN returned to prior levels as the US President made a U-turn and the two sides stroke a deal avoiding tariffs. We suspect that the political pressure within the US President’s party, may also have contributed to the agreement being reached. USD gains though, seem to remain in check, as on Friday a weak US employment report was released. We expect that the weak employment data for May, released on Friday to increase pressure on the Fed to proceed with a rate cut as a loss of economic momentum seems to be threatening the US economy. We expect the USD to book some gains as it recovers from Friday’s drop yet the prospect of a Fed rate cut may keep any gains under control. USD/MXN dropped during today’s Asian session, breaking all support levels set and landing below the 19.265 (R1) support line (now turned to resistance). We could see the pair dropping even further, in the aftermath of the deal struck, yet at a technical level it should be noted that the RSI indicator in the 1-hour chart remains below the reading of 30 (implying a rather overcrowded short position. Should the bears maintain control over the pair’s direction, we could see it breaking the 19.175 (S1) support line and aim the 19.090 (S2) support level. Should the pair’s direction be dictated by the bulls, we could see it breaking the 19.265 (R1) resistance line and aim for the 19.365 (R2) resistance level.
WTI prices rise as OPEC cuts are expected
WTI prices are on the rise, as the market seems to expect the OPEC+ group to maintain its production cuts. On Friday, Saudi officials had stated that the group was close to agree extended supply cuts. The rise seems to have been moderated somewhat as the US lifted the possibility of tariffs on Mexico, hence removing an uncertainty. Analysts seems to question the sustainability of the price increase and link it to the economic performance of a number of industrial economies. Oil prices may continue to rise should the threat of production cuts continue to loom over the market, or if economic forecast boost expectations for increased global demand. WTI prices rose yesterday testing the 54.45 (R1) resistance line. Should the commodity continue rise in value, we could see it breaking the 54.45 (R1) resistance line and aim for the 56.00 (R2) resistance level. On the flip side, should WTI come under the selling interest of the market, we could see WTI prices aiming if not breaking the 52.70 (S1) support line.
Other economic highlights, today and early tomorrow
Today during the European session, we get UK’s GDP growth rates for April and in the American session we get Canada’s number of House starts for May.
As for the rest of the week:
On Tuesday, we get from the UK the employment data for April and the US PPI rate for May. On Wednesday, we get the US inflation rates for May. On Thursday, we get from Australia May’s employment data and Eurozone’s industrial production for April. On Friday, we get China’s industrial production for May, the US retail sales for May, the US industrial production for May and the US preliminary Michigan consumer Sentiment for June.
USD/MXN H1
Support: 19.175 (S1), 19.090 (S2), 19.000 (S3)
Resistance: 19.265 (R1), 19.365 (R2), 19.475 (R3)
WTI H4
Support: 52.70 (S1), 51.25 (S2), 49.50 (S3)
Resistance: 54.45 (R1), 56.00 (R2), 57.50 (R3)
