The Mexican peso is losing its grip against the dollar, falling more than 0.65% in Friday’s North American session as the US currency gains ground on safe-haven appeal as the US-Iran conflict is far from over despite talks to end the war. USD/MXN is trading at 17.53, after rebounding from the intraday low of 17.41.
USD/MXN rises as oil risk recovers and Fed support
Market sentiment deteriorated as a result of the decline in shares of chip companies. The rise in oil prices fueled speculation that the Federal Reserve might raise interest rates and narrow the interest rate spread, which supported the Mexican peso, which began an appreciation cycle in early 2025.
Good inflation data in the US met with enthusiasm from investors, which reduced the chances of a Fed interest rate enhance at the September meeting. However, the United States and Iran are ready to continue fighting over the Strait of Hormuz, which could result in another enhance in oil prices.
On Friday, the University of Michigan (UoM) revealed that American consumers are slightly more bullish about the current economic situation and outlook. The consumer sentiment index rose from 50.7 to 54 in July, while short- and medium-term inflation expectations softened.
The US Dollar Index (DXY), which measures the US currency’s performance against a basket of six other currencies, is up a modest 0.05% to 100.76, representing a positive tailwind for the exotic USD/MXN pair.
Meanwhile, Fed officials have crossed the line. Cleveland Fed President Beth Hammack expressed a hawkish stance, expressing concern about persistently high inflation, which is at the top of her list, and saying, “Inflation is too high.” Hammack added that the labor market is solid and “economic growth rates are good and consumer spending is stable.”
There was no economic report in Mexico, but retail sales, employment and inflation data for the first fifteen days of July will be released next week. In the US, the schedule will include employment data and flash PMIs from the S&P Global Flash as Federal Reserve officials enter a standstill period ahead of the policy meeting scheduled for July 29.
USD/MXN Price Forecast: Technical Outlook
On the daily chart, USD/MXN is trading at 17.5333, holding above the clustered 50/100/200-day straightforward moving average (SMA) around 17.3856, suggesting a constructive near-term bias as the pair remains supported by the broader lower bottom of the trend. The price is currently testing the latest downward resistance trend line coming from a high at 18.1651, with this barrier emerging at 17.5456, while the Relative Strength Index (14) near 54.8 indicates moderate positive momentum but has not yet reached the overbought area.
On the upside, immediate resistance is at the short-term downtrend line at 17.5456, followed by a higher structural limit with longer-term downside resistance drawn from 21.0808, currently approaching 18.1200. On the other hand, initial support is provided by the triple cluster SMA at 17.3856, and a sustained hold above this moving average base would keep the bullish bias intact, while a daily close below this value would signal upside pressure waning and expose a deeper correction phase.
(The technical analysis for this story was written with the lend a hand of an AI tool. Find out more.)
Mexican Peso FAQs
The Mexican Peso (MXN) is the most frequently traded currency among its Latin American counterparts. Its value is largely determined by the performance of Mexico’s economy, the policies of the country’s central bank, the amount of foreign investment in the country, and even the level of remittances sent by Mexicans living abroad, particularly in the United States. Geopolitical trends could also influence MXN’s movement: for example, the nearshoring process – or the decision by some companies to move production capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency, as the country is considered a key manufacturing center on the US continent. Another catalyst for MXN is oil prices, as Mexico is a key exporter of the commodity.
The main goal of Mexico’s central bank, also known as Banxico, is to keep inflation low and stable (at or near its 3% target, i.e. in the mid-tolerance range of 2% to 4%). For this purpose, the bank sets the appropriate level of interest rates. When inflation gets too high, Banxico will try to tame it by raising interest rates, which will make it more costly for households and businesses to borrow money, thereby cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican peso (MXN) because they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Published macroeconomic data are crucial for assessing the state of the economy and may affect the valuation of the Mexican peso (MXN). Mexico’s sturdy economy, underpinned by high economic growth, low unemployment and high confidence, benefits MXN. Not only will it attract more foreign investment, but it could encourage the Bank of Mexico (Banxico) to raise interest rates, especially if this force is accompanied by higher inflation. However, if economic data is tender, MXN will likely depreciate.
As an emerging market currency, the Mexican Peso (MXN) tends to trend higher during periods of increased risk or when investors perceive that broader market risk is low and are therefore willing to engage in higher risk investments. Conversely, MXN tends to weaken during periods of market turmoil or economic uncertainty, as investors tend to sell higher-risk assets and flee to more stable safe and sound havens.
