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The Mexican Peso trips down and plunges more than 1.8% against the US Dollar on Tuesday, courtesy of risk aversion. An escalation of Middle East conflict looms, along with solid economic data from the United States (US) and overall US Dollar strength. The USD/MXN trades at 17.04, bouncing off daily lows of 16.68.

Mexico’s economic docket remains absent, with the next significant data release being March Retail Sales, scheduled for April 19, 2024. In the meantime, the International Monetary Fund (IMF) downwardly revised economic growth in Mexico from 2.7% to 2.4% in 2024 and from 1.5% to 1.4% in 2025.

The IMF reduced its 2025 forecast, arguing that the fiscal expansion that will drive progress this year will be reversed in the next year because the new administration will have to tighten its belt, reversing existing spending policy.

In that regard, Mexico’s Ministry of Finance expects the fiscal deficit to decrease from 5% to 2.5% of the Gross Domestic Product (GDP) next year, which would imply a cut in spending of 833.6 billion Pesos, according to the Pre-General Policy Criteria Economic 2025.

Across the border, US economic data was mixed, with housing figures missing estimates, while Industrial Production stood pat. Traders are bracing for Federal Reserve (Fed) Chair Jerome Powell’s speech at 17:15 GMT.

Daily digest market movers: Mexican Peso loses traction on risk aversion

Technical analysis: Mexican Peso depreciates sharply, USD/MXN pierces 17.00

The USD/MXN daily chart shows that the pair has shifted to a neutral/upward bias as the Mexican currency tumbles and depreciates past the 17.00 figure. On its way north, the pair has broken key resistance levels. These include the 50 and 100-day moving averages (DMAs), each at 16.81 and 17.03, which could pave the way for further upside.

The next resistance would be the 200-DMA at 17.16. Once cleared, that could pave the way to challenging the January 17 high at 17.38 before testing the 17.50 psychological level. On the other hand, if USD/MXN slides below 17.00, look for a pullback toward last year’s low of 16.62, followed by the April 12 low of 16.40.

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