• US Manufacturing PMI data reveals recessionary signs as business activity contracts.
• US Treasury bond yields fall sharply as odds for another rate hike remain uncertain.
• Strong PMI reading indicates continued growth in Mexico’s manufacturing sector.

USD/MXN climbs back above the 18.0000 thresholds after testing four-week lows around 17.9644 in the early North American session. Despite broad US Dollar (USD) weakness, outward flows from the emerging markets currency weakened the Mexican Peso (MXN). At the time of writing, the USD/MXN is trading at 18.0420.

US Manufacturing PMI data reveals recessionary signs as business activity contracts

Wall Street closed with gains, except for the heavy tech Nasdaq 100. US Treasury bond yields fell sharply, as odds for another rate hike lie at 52.4%. However, money market futures are already pricing in two rate cuts by the end of 2023.

Earlier data showed a slew of Manufacturing PMI data for the United States (US) flashed recessionary signs in the US. The S&P Global and ISM revealed that business activity contracted, with the latter decreasing to 46.3 in March, below the forecast of around 47.5. The gauge plummeted to its lowest since May 2020, weighed by worse-than-estimated new orders and employment measures.

The greenback continued to extend its losses, as the US Dollar Index fell 0.52% to 102.063. US

Consequently, the greenback erased some of its earlier gains, bolstered by higher oil prices. The US Dollar Index (DXY), which tracks the buck’s value vs. a basket of six currencies, slides from 103.05 to 102.20, down 0.38%.

On the Mexican front, Business Confidence in Mexico rose to 52.9, above February’s 52.1. The S&P Global Manufacturing PMI for March registered 51.6 points. In the last 32 months (since August 2020), the indicator has been above 50 points, which is still the expansion zone.

USD/MXN Technical analysis

From a technical perspective, the USD/MXN remains neutral to downward biased. Although Monday’s price action was bullish, an inverted hammer, preceded by a downtrend and a daily close around the previous candle mid-point, could open the door for further downside. Therefore, the USD/MXN first support would be the 18.0000 mark. Breach of the latter will expose the YTD low of 17.8968, followed by 17.5000.