USD/MXN Update: Mexican Peso Holds Firm After Banxico Comments

Over the past two trading sessions, USD/MXN has posted a decline of about 0.8% in favor of the Mexican peso, reviving a bearish bias that had faded in recent sessions. For now, selling pressure has persisted following Banxico’s decision at the end of last week, and this could remain relevant in the days ahead as markets look toward possible changes in monetary policy in upcoming meetings.

Where Does Banxico Stand Now?

On September 25, the Bank of Mexico once again continued its rate-cutting cycle, lowering the benchmark by 25 basis points to 7.5%—its fifth consecutive cut. The decision was justified by still weak economic growth in the short term and ongoing uncertainty around external trade tensions, which have yet to be resolved in a stable manner.

The vote, however, was split, as some board members opposed further steady cuts, mainly because inflation data has been creeping higher in recent months. Banxico also signaled that it will act with greater caution in future meetings if inflation requires it, suggesting that the phase of aggressive cuts may be nearing its end as price pressures continue to rise.

Recent data shows inflation moved from 3.51% in July to 3.57% in August, gradually edging above Banco’s 3% annual target. This uptick explains the split vote and reinforces the idea that the pace of cuts may not remain consistent in upcoming decisions.

Source: TradingEconomics

In this context, Banxico remains one of the most active central banks in the region in terms of rate cuts during 2025. However, a wide rate differential persists with the Federal Reserve, which currently holds rates at 4.25%, compared to Mexico’s 7.5%. This gap continues to make the peso attractive in the short term, as U.S. fixed-income securities currently offer lower yields.

Source: TradingEconomics

In conclusion, Banxico maintains a dovish stance in the short term, but with inflation edging higher and a sizable rate gap versus the U.S., the peso continues to attract demand. This helps explain why the currency has held firm and why selling pressure on USD/MXN may continue to dominate in the near term.

 

What About the Dollar’s Strength?

The U.S. dollar had staged a quick and steady recovery last week, but the bearish bias appears to be resurfacing. The DXY index, which measures the dollar against a basket of currencies, slipped from around 98.5 points to below 98 at the start of this week. This once again underscores the difficulty the greenback faces in regaining confidence and approaching the 100-point level, seen as a key market benchmark.

Source: TradingEconomics

As long as the dollar continues to show signs of weakness, the Mexican peso could keep gaining ground in the short term, reinforcing selling pressure on USD/MXN—especially if the DXY stays below 98 and fails to restore investor confidence.

 

USD/MXN Technical Outlook

Source: StoneX, Tradingview

• Persistent downtrend: Since early April, USD/MXN has maintained a steady bearish trend that has consolidated in the short term. With no significant bullish corrections to challenge this structure, the technical picture remains intact. If selling pressure holds, the downtrend could extend further in the sessions ahead.

 

• RSI: The RSI remains below the 50 neutral level, confirming that bearish momentum has dominated the last 14 sessions. If this behavior continues, current selling pressure could strengthen further.

 

• MACD: The MACD histogram remains close to the zero line, reflecting a balance of forces in short-term moving averages. This neutrality suggests the market could remain in a phase of indecision in the coming days.

 

Key Levels:

• 18.21 – Key Support: A level not seen since July 2024. A break below would reinforce short-term selling pressure and extend the long-term bearish trend.

 

• 18.50 – Nearby Barrier: Corresponds to the 50-period simple moving average. As long as price action holds here, a lateral structure like that of recent weeks could persist.

 

• 18.91 – Final Resistance: Aligned with the Ichimoku cloud, this level marks recent highs. A rebound toward this area would put the current downtrend at risk and could open the door to a stronger bullish bias in the short term.

 

Written by Julian Pineda, CFA – Market Analyst

Follow him: @julianpineda25