Forex Market: USD/MXN daily trading forecast

Yesterday’s trade saw USD/MXN within the range of 13.6223-13.6833. The pair closed at 13.6705, gaining 0.13% on a daily basis.

At 8:11 GMT today USD/MXN was down 0.10% for the day to trade at 13.6606. The pair touched a daily low at 13.6560.

Fundamentals

United States

Orders for durable goods

Durable goods orders in the United States probably dropped 0.6% in October compared to a month ago, according to the median forecast by experts. In September new orders for manufactured durable goods dropped at a monthly pace of 1.3% to $241.6 billion, marking a second consecutive slide, as capital goods orders fell the most in eight months and transportation orders declined 3.7%. Shipments of manufactured durable goods in September, rising during three of the last four months, were up 0.1% to $245.6 billion. Inventories of manufactured durable goods in September, rising during seventeen of the last eighteen months, climbed 0.4% to reach $404.8 billion. Non-defense new orders for capital goods, on the other hand, decreased 5.4% to $82.0 billion in September, according to the report by the US Census Bureau.

Durable goods orders, as an indicator, gauge the strength of US manufacturing sector and represent a major portion of nations factory orders. This is a closely watched report on manufacturing activity, because durable goods are the first type of goods to be affected by an economic downturn or upturn.

Durable goods are designed to last three or more years and encompass aircraft, automobiles and buses, cranes, machine parts, appliances etc. More than 85 industries are represented in the sample, which covers the entire United States. The logic behind this indicator is that consumers need to be very optimistic in order to buy an automobile in comparison with, for example, first necessities such as food or clothing. Therefore, durable goods are among the first goods, which a consumer may abstain from purchasing, in case overall economic activity begins to contract. The same is valid for company purchases. During a recession, an airliner is less likely to purchase new planes and as factory output contracts, it is less likely to purchase new machines.

Durable goods orders, which exclude transportation, probably rose 0.3% in October on a monthly basis, following a 0.2% drop in September. Large ticket orders, such as automobiles for civil use or aircraft, are not present in the calculation, as their value may be in a wide range. This way the index provides a more reliable information in regard to orders for durable goods.

In case orders decreased at a faster pace than projected, this would certainly have a bearish effect on the greenback. US Census Bureau is scheduled to release the official numbers at 13:30 GMT.

Personal Income and Personal Spending

Personal spending in the United States probably rose 0.3% in October compared to a month ago, according to market expectations, while personal income was probably up 0.4%. Personal income increased $22.7 billion, or 0.2% in September, while disposable personal income (DPI) rose $15.7 billion, or 0.1%. Private wages and salaries recorded a $12.6 billion increase in September in comparison with a gain of $36.3 billion in August. At the same time, Personal consumption expenditures (PCE) decreased $19.0 billion, or 0.2% in September. Higher-than-expected rates of increase imply good employment conditions and, therefore, are dollar positive. The Bureau of Economic Analysis is to publish the official figures at 13:30 GMT.

Chicago Business survey

The Chicago Purchasing Managers Index (PMI) probably slowed down to a reading of 63.0 in November from 66.2 during the prior month. The latter has been the highest value since April 2011, when the PMI came in at 67.6. The index reflects business conditions in regions manufacturing sector and is interrelated with the Manufacturing Index, published by the Institute for Supply Management (ISM). A reading above the key level of 50.0 is indicative of expansion in manufacturing activity. In case the PMI exceeded forecasts, this would heighten the appeal of the US dollar. The MNI Deutche Börse Group will release the official reading of the Chicago barometer at 14:45 GMT.

University of Michigan/Reuters Confidence Index

The monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the United States continued to improve in November. The final reading of the corresponding index, which usually comes out two weeks after the preliminary data, probably rose to 90.0 during the current month from a preliminary value of 89.4. If so, this would be the highest level since July 2007, when the final index reading was reported at 90.4. In October the gauge of confidence came in at 86.9. The survey encompasses about 500 respondents throughout the country. The index is comprised by two major components, a gauge of current conditions and a gauge of expectations. The current conditions index is based on the answers to two standard questions, while the index of expectations is based on three standard questions. All five questions have an equal weight in determining the value of the overall index.

The sub-index of current economic conditions surged to 103 in November, according to preliminary data, from a final reading of 98.3 in October. The sub-index of consumer expectations came in at a reading of 80.6 in November, improving from a final value of 79.6 in October. Both gauges outstripped expectations.

In case the index of consumer sentiment showed a larger improvement than projected, this would boost demand for the US dollar. The final reading is due out at 14:55 GMT.

New Home Sales

Sales of new single-family homes probably rose to the seasonally adjusted annual rate of 470 000 during October, according to market expectations. The index of new home sales gained 0.2% to the annual rate of 467 000 in September. The median sales price of new houses sold in September was $259 000, while the average sales price was $313 200. The seasonally adjusted estimate of new houses for sale at the end of September was 207 000, which represents a supply of 5.3 months at the current sales rate, according to the report by the US Census Bureau.

There are several points to watch out for when interpreting the New Home Sales numbers. First of all, the statistics does not record any houses that are not going to be sold immediately. As an example, the case when a house is commissioned to be built on an existing plot of land, that the purchaser owns.

Second, the statistics are taken at the point where a customer has signed a sales contract or has put a deposit down. At this point the house can be at any stage of construction.

Third, the sales figures are not adjusted to take into account the sales contracts, which are eventually canceled by the builder or the customer. However, the same house is not included in any subsequent count when it is eventually sold to another customer.

This report has a significant influence on the Forex market, because increasing new home sales can lead to a rise in consumption, for example. The new home sales index is also an excellent indicator of any economic downturns or upturns due to the sensitivity of consumers income. When, for instance, new home sales drop over several months, this usually is a precursor to an economic depression.

In case the index increased more than anticipated, this would usually provide support to the greenback. The Census Bureau is to report the official figure at 15:00 GMT.

Mexico

Balance of trade

At 14:00 GMT Mexicos Insituto Nacional de Estadistica Y Geografia (INEGI) is expected to report on nation’s trade balance during October. In September the country had a trade surplus at the amount of USD 0.590 billion, the largest surplus since March, compared to a surplus figure of USD 0.651 billion in September a year earlier, as imports rose at a slightly higher rate than exports. Total exports rose at an annualized rate of 9.2% to USD 34.26 billion in September. Oil sales dropped 7.1%, while non-oil exports grew 11.6%. Total imports increased 9.6% year-on-year to USD 33.66 billion in September, as purchases of capital goods marked the largest gain on the year, or 11%, according to the report by the INEGI.

The trade balance reflects the difference in value between exported and imported goods during the respective period. A positive figure indicates that more goods and services have been exported than imported. Export demand has a direct link to demand for the national currency and also causes an impact on levels of production. In case Mexico had a wider trade balance surplus in October, this would have a bullish effect on the peso.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 13.6587. In case USD/MXN manages to breach the first resistance level at 13.6951, it will probably continue up to test 13.7197. In case the second key resistance is broken, the pair will probably attempt to advance to 13.7561.

If USD/MXN manages to breach the first key support at 13.6341, it will probably continue to slide and test 13.5977. With this second key support broken, the movement to the downside will probably continue to 13.5731.

The mid-Pivot levels for today are as follows: M1 – 13.5854, M2 – 13.6159, M3 – 13.6464, M4 – 13.6769, M5 – 13.7074, M6 – 13.7379.

In weekly terms, the central pivot point is at 13.6053. The three key resistance levels are as follows: R1 – 13.6884, R2 – 13.7568, R3 – 13.8399. The three key support levels are: S1 – 13.5369, S2 – 13.4538, S3 – 13.3854.