USD/MXN Analysis: Mexican peso weakens ahead of the Fed decision

The Mexican peso is once again showing signs of short-term weakness. During today’s session, USD/MXN is up more than 0.5%, once again reflecting strength in the U.S. dollar.

For now, buying pressure remains in place as the market waits for the Federal Reserve decision and evaluates the possible dynamic between central banks. This is also being accompanied by doubts around new tariffs on Mexico, a factor that could also affect confidence in the Mexican peso. If the market confirms a more aggressive Fed and trade uncertainty remains in place, USD/MXN could continue to face a phase of indecision or even recovery over the next few trading sessions.

What is expected from the Fed?

Today’s session will be marked by one of the most relevant events of the week: the Federal Reserve’s interest rate decision. For now, the market assigns a probability close to 66% that the U.S. central bank will keep interest rates unchanged.

However, a probability close to 33% of a possible rate hike today has also started to gain relevance. This shows that the market is beginning to consider a potentially more aggressive Fed for the next monetary policy meetings.

In addition, just hours before the decision, there is still a probability above 56% that the central bank will raise rates at the September 16 meeting. For this reason, the Fed’s message will be key to determining whether expectations of higher rates in the United States gain strength over the coming months.

Source: CMEGROUP

For its part, the Bank of Mexico has not given clear signals that it could adopt a more aggressive stance in the coming months. In fact, Mexican monetary policy remains focused on avoiding relevant changes to interest rates, which makes sense given the recent moderation in inflation.

After reaching a 2026 high of 4.59% in March, annual inflation in Mexico fell to 3.37% in the June data. This reduction is important, as the rate remains close to the central bank’s 3.00% annual target and reduces pressure for Banxico to adopt a more restrictive stance.

Source: TradingEconomics

This scenario is relevant because the current 6.5% rate in Mexico remains attractive compared with other central banks and maintains an important differential against the 3.75% rate in the United States. However, if the Fed starts to show a more consistent possibility of new hikes, this differential could narrow and reduce the relative appeal of peso-denominated investments.

Therefore, if today’s decision confirms a more aggressive outlook from the Federal Reserve, dollar-denominated investments could gain greater appeal. This would limit the Mexican peso’s ability to recover and could maintain a phase of indecision or buying pressure in USD/MXN over the next few sessions.

 

Does the threat of new tariffs remain in place?

For several sessions now, it has been known that the United States decided to apply an additional 10% tariff on Mexican products under Section 301. In principle, this measure applies to Mexican goods that are not covered by the USMCA trade agreement.

This event is relevant because Mexico maintains a high commercial dependence on the United States. By the end of 2025, nearly 80% of Mexican exports were directed to that country, meaning the impact of new tariffs could be more sensitive compared with other economies.

Although Mexico remains focused on strengthening negotiations to avoid additional tariffs or remove the ones already in place, no relevant progress has been seen yet suggesting that the U.S. government is willing to move away from these measures. This uncertainty could affect the perception of economic stability in Mexico over the coming months.

For this reason, if no positive updates emerge from negotiations, the appeal of peso-denominated investments could remain limited. This would add another pressure factor for USD/MXN, maintaining a possible phase of indecision over the next few trading sessions.

 

Technical forecast for USD/MXN

Source: StoneX, Tradingview

• Sideways range remains relevant: For several months, USD/MXN has continued to move within a broad long-term sideways range. Despite some movement attempts, neutrality remains the dominant feature on the chart. For now, this structure remains the most important technical reference. If price fails to move consistently away from neutral zones, the sideways range could continue to reflect a lack of direction over the next few trading sessions.
   

• RSI: At the moment, the RSI remains close to the neutral 50 level. This indicates a balance between buying and selling impulses in the average of the last 14 sessions. If the indicator continues to behave this way, neutrality could remain relevant on the daily chart.
   

• MACD: The MACD remains close to the neutral 0 line, suggesting balance in the strength of short-term moving averages. This reading also reinforces the possibility that USD/MXN could continue to show a neutral phase in the short term.

Key levels:

• 17.67 – Main resistance: This recent high zone coincides with the 200-period simple moving average. Sustained movements toward this level could mark the beginning of a more consistent buying bias and open room for a possible short-term bullish trend line.
   

• 17.41 – Current barrier: This relevant retracement level from recent weeks is also an important neutral zone and coincides with the 50-period simple moving average. If price fails to move away from this reference, the indecision phase could be reinforced and the sideways range could extend as the dominant structure.
   

• 17.10 – Relevant support: This 2026 low zone remains the main bearish barrier for now. Movements toward this level could bring the selling bias back into focus and open room for a continuation of the descending channel that had remained the dominant structure in previous months.
   

Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25