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Aug 21 2019, 09:11 PM (+06) |

Good afternoon!

On Wednesday the Canadian CPI was released. The situation improved slightly in July. The CPI MoM was published at 0.3%. The CPI YoY did not change and remained at 2%. It is positive to see that the prices of durable goods are getting better. 

Picture 1. Canadian CPI YoY

‘Loonie’ instantly plummeted and reached 1.32500. In a short-term perspective, our expectations are more negative. The possible target for the price may become 1.31000. 

The US existing home sales were released on Wednesday as well. The real estate sector improved. According to the National Association of Realtors, the situation became better in the Midwest, South, and West. In the Northeast, the number of existing home sales fell down by 2.9%. 

Picture 2. Existing home sales

Mexico published its retail sales for June. The fact was released at -0.5% - thus the consumption is slowing down. The Mexican economy is strongly dependent on the US economy. 76.5% of all Mexican export goes to the United States. Monetary easing in the US will definitely hit Mexican exporters. Meanwhile, according to Banco de Mexico ‘during the second quarter of 2019 stagnation of economic activity in Mexico observed in the previous quarters continued’. The central bank is monitoring inflation, which fell down from 3.95% to 3.78%. At the last meeting a week ago, monetary authorities decided to cut the interest rate by 25 b.p. to 8.00%. We may consider such steps as preventive actions. 

USD/MXN continued to rise till it reached its local June’s maximum. On Tuesday USD/MXN reversed and started falling down. From the technical side, we see several possible signals for correction. First, USD did not break its resistance zone (19.90000 – 20.00000) though the price reached the upper regression line. There is a bearish divergence between the MACD histogram and the price. The Williams %R reversed and returned back from the ‘overbought’ zone. 

If the USD breaks the trend line (19,67000) down the possible target for the price may become 19.40000. As a result, we recommend considering shorts after it breaks its support level.   


Picture 3. USD/MXN 1D TF.

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