Forex Market: USD/MXN daily trading forecast

Yesterday’s trade saw USD/MXN within the range of 14.0784-14.1656. The pair closed at 14.1547, gaining 0.40% on a daily basis.

At 10:40 GMT today USD/MXN was up 0.03% for the day to trade at 14.1600. The pair touched a daily high at 14.1700.

Fundamentals

United States

Change in non-farm payrolls, unemployment rate

Employers in all sectors of economy in the United States, excluding the farming industry, probably added 232 000 new jobs in November, according to the median forecast by experts, after a job gain of 214 000 in October. If so, this would be the tenth consecutive month, when employment gains exceeded 200 000. Food services and drinking places added 42 000 jobs in October, compared with an average gain of 26 000 jobs per month over the prior 12 months. In October employment in retail trade rose by 27 000, in health care – by 25 000, in professional and business services – by 37 000. 15 000 jobs were added in the sector of manufacturing.

The non-farm payrolls report presents the total number of US employees in any business, excluding the following four groups: farm employees, general government employees, employees of non-profit organizations, private household employees. The reading, released most often, varies between + 10 000 and as much as + 250 000 at times when economy is performing well. Despite the volatility and the possibility of large revisions, the non-farm payrolls indicator presents the most timely and comprehensive reflection of the current economic state. Total non-farm payrolls account for 80% of the workers, who produce the entire Gross Domestic Product of the United States. In case of a larger-than-expected gain in jobs, the US dollar would certainly be supported.

Average Hourly Earnings probably increased 0.2% in November compared to October, when earnings rose by another 0.1%.

At the same time, the rate of unemployment in the country probably remained stable at 5.8% in November. The latter has been the lowest level in at least six years. In October the number of unemployed persons dropped to 9.0 million, according to the report by the Bureau of Labor Statistics. The number of long-term unemployed during the same month (those jobless for 27 weeks or more) was little changed at 2.9 million, while accounting for 32% of the total number of unemployed. The number of persons in part-time employment for economic reasons was almost unchanged in October at 7.0 million.

The unemployment rate represents the percentage of the eligible work force that is unemployed, but is actively seeking employment. A person who is not classified as employed or unemployed is excluded from the statistics. One counts as unemployed, if he falls in all of the following categories: he/she was unemployed during the last week; he/she is able bodied; he/she has been seeking employment for a period of at least four weeks, which end during the week when the research is conducted. People, who have been laid off and are awaiting to be hired again, are also classified as unemployed. In case the unemployment rate met expectations or even fell further, this would have a bullish effect on the greenback. The Bureau of Labor Statistics will release the official employment data at 13:30 GMT.

Balance of trade

The deficit on US trade balance probably contracted to USD 41.50 billion during October from a trade gap of USD 43.03 billion, registered in September. The latter has been the largest shortfall since May, when a figure of USD 44.66 billion was reported. In September total exports dropped USD 3.0 billion to reach USD 195.6 billion, while the total value of imports increased by USD 0.1 billion to USD 238.6 billion. The goods deficit expanded by USD 2.4 billion to USD 62.7 billion in September compared to a month ago, while the services surplus contracted by USD 0.6 billion to USD 19.6 billion.

The trade balance, as an indicator, measures the difference in value between the country’s exported and imported goods and services during the reported period. It reflects the net export of goods and services, or one of the components to form the Gross Domestic Product. Generally, exports reflect economic growth, while imports indicate domestic demand. In case the trade balance deficit shrank more than anticipated, this would boost demand for the US dollar. The Bureau of Economic Analysis will release the official trade data at 13:30 GMT.

Mexico

Interest rate decision

Bank of Mexico (Banco de México) probably left its benchmark interest rate (overnight interbank rate) without change at 3.0% at the policy meeting today. The central bank reduced the overnight rate by 0.50% to the current record low level of 3.0% at its June 6th meeting, in order to bolster economy, that has not managed to recover in 2014. The bank kept its current stance on policy at the October 31st meeting, as it projected no inflationary pressures. Although inflation rate was reported at 4.22% in September, or above the central bank’s target of 3 percent plus one-point tolerance range for a third consecutive month, policymakers project the rate to slow down in the beginning of 2015. Meanwhile, annualized core inflation has still remained around 3%.

Short-term interest rates are of utmost importance for the valuation of national currencies. In case Bank of Mexico is dovish about inflationary pressure in the economy and, thus, decides to maintain or even further reduce the benchmark rate, this will have a bearish effect on the peso.

The official policy decision is scheduled to be announced at 15:00 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 14.1329. In case USD/MXN manages to breach the first resistance level at 14.1874, it will probably continue up to test 14.2201. In case the second key resistance is broken, the pair will probably attempt to advance to 14.2746.

If USD/MXN manages to breach the first key support at 14.1002, it will probably continue to slide and test 14.0457. With this second key support broken, the movement to the downside will probably continue to 14.0130.

The mid-Pivot levels for today are as follows: M1 – 14.0294, M2 – 14.0730, M3 – 14.1166, M4 – 14.1602, M5 – 14.2038, M6 – 14.2474.