USD/MXN has been able to consolidate a push above the 20 Pesos mark, gaining traction as the pair managed to break over the 76.4percent Fibonacci at 20.18. The main objective for bulls will be likely to be a push above the yearly high at 20.60, before attempting to recover the 21 Pesos mark.
Some of the weakness attributed to the Mexican money this week has to do with the power outages found in Texas. Mexico is a significant importer of natural gas in the USA and a decrease of roughly 75% in Texas pipelines has left the Latin American state concerned about its economic prognosis as electricity shortages could produce the comeback from the Covid-19 pandemic much more fragile.
The Mexican President was seen urging citizens to consume less power during peak times so as to make sure that the national electricity system can keep on working and averts blackouts. News that Texas was banning all exports of natural gas before February 21st to be sure the nation managed to cope with an unusual winter storm put additional stress on the Peso, despite Mexico's attempts to stop the ban from taking place.
Jose Luis de la Cruz, director of the Institute for Industrial Development and Economic Growth (IDIC), has grave concerns within the natural gas export ban. He's predicted that the reduction in distribution could cause a 1 percentage point drop in Mexico's GDP in the first quarter of this year, justified by the simple fact that workflows could be impacted and large factories in the north of the nation have reported disruptions.
Elsewhere, higher bond yields and weaker than expected jobs data have kept the US Dollar marginally supported, playing to the clues of greater economic recovery from treasury returns whilst juggling its safe-haven requirement on poorer data. I anticipate USD/MXN to attempt to capitalize on further upside down this coming week, although bullish momentum is very likely to be harder to find in an attempted move higher, so we might see backward consolidation prior to any substantial moves could be seen, particularly if we see a return to normalcy with respect to energy source from the US.
There's a fair bit of financial data out next week for Mexico, but I expect most of it to be discounted by the markets provided they're lagging indicators. An interesting data point may be the half-month CPI for the month of February since it might provide additional insight into the next movement by the Mexican Central Bank with regards to interest rates.
