July 12, 2021 — bridge21 weekly rate update
USD:MXN rates break 20:1 before retreating to 19.9:1 levels — BTC rangebound between 32k USD and 35k USD.
Short-term USD:MXN forecast
The USD:MXN rate repeated the same trend from last week, with rates climbing above 20:1 levels mid-week, only to retreat to 19.9:1 levels last Thursday.
Arturo Herrera, Banxico’s nominee for governor as of last Wednesday (pending confirmation by the Senate), made dovish comments about inflation over the weekend at the G-20 conference in Venice. Herrera attributed recent inflation to “temporary issues”, mostly related to unprecedented deficit spending by governments in response to COVID-19.
This reinforces the theory that (for now) future rate hikes by Banxico are unlikely unless they follow hikes by the US Fed. To be clear, dovish interest rate policy by Banxico drives higher USD:MXN exchange rates.
We’re still neutral to mildly bullish for the USD:MXN exchange rate over the short-term. There’s strong support around 19.6:1 with little resistance to the upside.
Bitcoin continues to trade in a range between 32k USD and 35k USD.
This week we’re taking a zoomed out view of Bitcoin’s price in US Dollars. We’re building stronger technical support around 30k USD levels. Below this, we have the psychologically important all-time high from the last bull market around 20k USD.
Over the longer-term, we think the chances of breaking below 30k USD and testing 20k USD levels is more likely than breaking to new all-time highs above 64k USD.
That said, we could trade sideways for quite a while before these levels are tested. Past Bitcoin bear markets consistently took an average of a full calendar year to reach their subsequent low from their new all-time high.
One caveat… we could see a pennant formation in the recent price action, with higher lows, and lower highs. Pennants tend to drive price break-outs up or down. If we continue to see a squeeze where the trading range continues to compress, a volatile move in price in either direction becomes increasingly likely.
Longer-term USD:MXN rate forecast
Our long-term forecast is still higher for the USD:MXN exchange rate through 2021.
Best regards,
Will — bridge21.com
The content in this update is for informational purposes only. You should not construe any information or other material in this update as legal, tax, investment, financial, or other advice. While we took care to share correct information from reputable sources, bridge21 cannot guarantee the accuracy or timeliness of the information.
