USD/MXN Outlook: The Mexican peso shows weakness ahead of the FOMC decision

Over the last two trading sessions, USDMXN has shown limited movement, with an average variation of around 0.3%, as the market awaits the U.S. central bank decision. Although the Bank of Mexico is set to announce its decision next week, there have been no meaningful updates supporting a sustained strengthening of the Mexican peso.

As a result, U.S. dollar movements are likely to continue driving USDMXN price action, at least until further signals emerge from the Bank of Mexico. In this context, a phase of indecision may continue to dominate in the coming sessions.

Will the Federal Reserve decision have an impact?

Today, one of the most relevant global central banks, the Federal Reserve, is set to announce its interest rate decision. Current expectations point to no change in the policy rate, which remains at 3.75%. In fact, the CME probability tool indicates a 98.9% probability that rates will remain unchanged at this meeting.

 

Source: CMEGROUP

However, what has become more relevant is the shift in expectations for future decisions, particularly in light of the recent Middle East conflict. At present, there is more than a 60% probability that rates will remain unchanged at least through the July meeting. Additionally, a potential rate cut is now expected to be pushed toward December 2026, with a probability of around 40.3%.

This shift has reinforced a higher-for-longer rate environment, with limited expectations for near-term cuts.

Source: CMEGROUP

Today’s decision will be key in determining whether the Federal Reserve intends to maintain this neutral stance for most of the year or if there is room for a more aggressive policy approach in the coming months. This outlook has supported the U.S. bond market and has been a key driver behind recent dollar strength.

In this context, if a more restrictive tone is confirmed, it could further support dollar demand, making it more difficult for the Mexican peso to recover in the short term. As a result, USDMXN may continue to trade in a range-bound or indecisive manner until the Bank of Mexico decision is also released.

 

Can the Bank of Mexico shift the outlook?

In addition to the Federal Reserve decision, the Bank of Mexico is scheduled to announce its monetary policy decision on March 26, 2026. While no immediate changes are expected to the current 7.00% rate, recent inflation dynamics have started to draw attention.

Mexico’s inflation stood at 4.02% in February, above the 3.00% target, and has shown an upward trend since late 2025. This could become a growing concern for the central bank’s outlook for 2026.

Source: TradingEconomics

In this context, the Bank of Mexico’s communication will be critical, particularly regarding future inflation pressures. If the central bank signals a more restrictive stance, or even the possibility of rate hikes, this could act as a key catalyst for the Mexican peso.

A more aggressive policy stance could increase the attractiveness of peso-denominated assets, potentially boosting demand and putting downward pressure on USDMXN. However, this will depend heavily on the tone adopted by the central bank.

 

USD/MXN Technical Outlook

Source: StoneX, Tradingview

• The broader downtrend begins to weaken: Over the past months, USDMXN has followed a consistent downward channel, maintaining a bearish bias. However, recent price recovery has started to test the upper boundary of this trendline. If buying pressure continues to build, it could begin to challenge the prevailing bearish structure, opening the door to a potential shift in price dynamics in the coming weeks.
   

• RSI: The RSI indicator remains close to the 50 level, suggesting a balance between buying and selling pressure. This reflects the absence of a clear dominant trend and supports the idea of a short-term indecision phase.
   

• MACD: A similar pattern is observed in the MACD, with the histogram fluctuating around the zero line, indicating a lack of strong directional momentum and reinforcing a low-directionality environment.

 

Key levels:

• 17.95 – Key resistance: Level aligned with recent highs and positioned above the downtrend line. A break above this level could threaten the bearish channel and open the door to a more dominant bullish bias.
   

• 17.46 – Near-term barrier: A relevant neutral zone aligned with the 50-period moving average. Price returning to this level could reinforce a range-bound environment in the short term.
   

• 17.10 – Key support: A level not seen since April 2024. A sustained break below this zone could intensify the bearish bias and reinforce the downward trend in USDMXN.
   

Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25