Mexican Peso builds winning streak as USD/MXN drifts toward 18.00

The Mexican Peso (MXN) demonstrated a series of consecutive bullish days as the USD/MXN exchange rate slid by around 0.34% on Monday. This decline came after weaker-than-anticipated US data and a lackluster Nonfarm Payrolls report from the previous Friday. The pair traded at 18.08, after peaking near 18.26 during the session. Despite heightened tensions in the Middle East, risk appetite improved on Monday, as expectations for a swift resolution diminished.

Wall Street closed the day positively, driven by tech firms, despite rising US Treasury yields and a stronger US Dollar.

The US 10-year Treasury yield increased marginally to 5.349%, rising by 3 basis points to 5.307%. However, the US Dollar Index (DXY), which gauges the Dollar's performance against six currencies, rose by 0.23% to 102.15. US data indicated a slowdown in business activity, with the ISM Services PMI falling from 55.4 to 54.9 in September, below expectations of 55. Inflationary pressure showed signs of rising, with the prices paid subcomponent surging from 72.6 in August to 74, surpassing forecasts.

Steve Miller, chair of the ISM’s Services Business Survey Committee, commented: "Tariffs and fuel cost impacts were the primary concerns impacting respondents' supply chains." Traders are currently monitoring the forthcoming Federal Open Market Committee (FOMC) meeting minutes on Wednesday and upcoming Fed speeches before the release of jobless claims the subsequent day.

In Mexico, Gross Fixed Investment for July was announced, hitting 1.4% MoM as expected, up from 1.3% in the prior period. The modest figure did not significantly impact the market as traders await inflation figures on both the consumer and producer sides on Thursday, as well as Banxico's last meeting minutes.

The International Monetary Fund (IMF) suggested that Mexico needs to intensify efforts to reduce its debt, although fiscal consolidation persists in 2026. The IMF anticipates Mexico's economy to expand by 1.5% this year and 1.8% in 2027, but highlighted that growth is limited by external shocks and called for a moderate, tight monetary policy stance. Meanwhile, Mexico's 2027 budget anticipates public debt to rise to 55% of GDP, despite the government's ongoing fiscal consolidation efforts.

On the daily chart, USD/MXN is trading at 18.0890, continuing its advance above clustered simple moving averages (SMA) from the 50-, 100- and 200-day lookbacks. This alignment keeps the near-term bias firmly bullish, with the price decisively above its key trend proxies, while the Relative Strength Index (14) at 72.84 indicates overbought conditions, hinting at a stretched upside and a potential pause in the bullish trend.

Possible support on the downside lies at the triple SMA cluster around 17.25, bolstered by earlier horizontal demand at 16.89, should a more profound pullback occur. On the upside, without a specific trend-line reading, the prevailing downward resistance line from higher levels suggests that any fresh push beyond recent peaks would encounter technical headwinds at subsequent highs, with only a sustained breach above that descending cap opening room for a more aggressive bullish extension.