Mexican Peso: Downward momentum returns after 200-DMA break – Societe Generale

The Mexican Peso (MXN) has witnessed a return of downward momentum following the break of its 200-day moving average (200-DMA). Societe Generale analysts, like Kenneth Broux, have noted this shift in trend. The USD/MXN pair recently crossed above a multi-month descending trend line and reclaimed the 200-DMA for the first time since April 2025.

This positive development indicates potential upward momentum. However, the pair will need to stay above 17.40/17.35 to facilitate a broader uptrend. The next significant hurdles for the currency pair are the June peak near 17.68 and projections around 17.80. In Latin America, the Bank of Mexico (Banxico) is expected to keep the policy rate unchanged at 6.50% during today's meeting.

Policymakers are expected to maintain a data-dependent message, balancing improving core inflation with softer growth momentum against a more challenging external environment, characterized by higher US rates and global uncertainty. The base case remains that Banxico will decouple from the Federal Reserve and maintain a hold on interest rates through 2026, leading to a narrowing spread between the two.

Speculative investors have been long on MXN, with net long positions at 27.5% of open interest just before the Fed/BoJ meetings. However, a sharp surge in USD/MXN breaking above the 200-DMA to 17.50 suggests potential capitulation of peso longs.