Mexican Peso holds near 17.00 as US-Iran strikes hit Peso

The Mexican Peso slipped a bit from its earlier gains against the US Dollar on Tuesday as the United States and Iran engaged in a series of strikes, dampening risk appetite and putting pressure on the emerging market currency. The USD/MXN pair hovered around 16.99, essentially unchanged. Geopolitical tensions are influencing price movements in the financial markets.

The White House authorized attacks on Iran's coastal regions, aiming to limit the country's ability to disrupt shipping through the Strait of Hormuz. In response, Iran announced retaliatory attacks against US bases and interests. This triggered a rise in the US Dollar, as indicated by the US Dollar Index (DXY), which climbed 0.27% to 99.68.

Recent data from the US suggested the Federal Reserve might raise interest rates, given the robust state of the labor market. Manufacturing activity in the US, though easing, remained robust, as per the Institute for Supply Management (ISM). The ISM Manufacturing PMI for August decreased from 55.6 to 54.6, however, it remained above the forecast of 55.2.

The JOLTS job openings survey indicated hiring was lower than expected at 7.217 million, compared to the forecast of 7.3 million. On the economic calendar, the US had several key releases, including the Fed's Beige Book, the latest jobs data, the ISM Services PMI for August, and the Nonfarm Payrolls report on September 4. In Mexico, trading was relatively light, with S&P Global reporting that the August Manufacturing PMI had fallen from 51.3 in July to 49.8.

Apart from this, traders are watching the August Consumer Confidence report, scheduled for September 3. The Bank of Mexico (Banxico) released a survey of private economists, showing that most analysts had reduced their 2026 inflation forecast from 4% to 3.90% by the end of the year, and their projection for 2027 to 3.84%. Inflation expectations are anticipated to fall from 4% to 3.99% by year-end, and for 2027 from 3.86% to 3.80%.

The survey also indicated that the economy was projected to expand by 1.30% in 2026 and 1.80% in 2027. Based on technical analysis, the USD/MXN pair is currently trading at 17.0000, remaining in a bearish trend as it stays below a triple simple moving average cluster near 17.2893 and a shorter-term descending trend-line barrier around 17.3217.

The Relative Strength Index (14) stands at 38.9, below neutral, signaling weak but not extreme downside momentum following the recent bounce off late-August lows. The next key resistance level is at the downtrend line originating from 18.1651, projecting around 17.3217, with the clustered 50/100/200 simple moving averages near 17.2893 reinforcing this supply zone.

No significant technical support is expected until the longer-term reference at the prior trend-line break around 15.4181, leaving the pair susceptible to additional declines if sellers decisively move away from the 17.00 mark.