Change The Month, Change The Trend?

Mexican Peso: The dollar slipped through March's low (~MXN20.2830) ahead of the weekend, but in thin trading, it recovered and finished the week above MXN20.30.  The MACD is leveling off after trending lower since early March.  The Slow Stochastic has turned back down.  Mexico is experiencing stagflation.  Without much fiscal support, the economy likely contracted in the first quarter.  Yet, inflation is rising, and on April 8 is likely to report that headline CPI pushed well above the upper end of the central bank's 2%-4% target range and to a three-year high. Rate cut hopes have already been dashed, but such a report could weigh on the peso.  Strong chart support for the dollar is not seen until closer to MXN20.00.  Resistance is likely to be encountered in the MXN20.50-MXN20.55 area. 

Chinese Yuan:  The dollar rose for the sixth consecutive week against the yuan.  Some reports try linking the swap activity by large Chinese banks to masked intervention by the PBOC.  However, given the narrowing premium over the US, the poor performance of Chinese stocks, and what seems like more persistent outflows under QDII, the pressure on the yuan seems explainable by market forces.  If the dollar is rising against nearly all the world's currencies, why should it not rise against the yuan too? The greenback reached a four-month high last week near CNY6.58.  The offshore yuan is weaker, which is also where speculators can express views.  The 6.60-level against both is an important psychological barrier.  We suspect that may be the upper end of a new range, but if not, the potential extends toward the 200-day moving average (~CNY6.70 and CNH6.68) (CYB).

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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