Mexican Peso rally pauses ahead of US inflation report

The Mexican Peso loses some ground against the US Dollar on Monday as traders book profits after a worse-than-expected US jobs report last week and as eyes turn to the release of US inflation figures on Wednesday. The USD/MXN trades at 17.14, modestly up 0.05%.

USD/MXN steadies as traders take profits, as US inflation data, Fed expectations driving the markets

Last week, the Greenback was pressured by intervention in the FX markets by US and Japanese authorities aimed at strengthening the Japanese Yen. However, the move is fading as the US Dollar Index (DXY) posts gains of over 0.20%.

The DXY, which tracks the performance of the buck against six currencies, sits at 99.80, after refreshing two-month lows at 99.40.

July’s Nonfarm Payrolls were worse than expected, with the economy slashing jobs, but the Unemployment Rate ticked lower from 4.2% to 4.1%. Although this is just one reading, traders would also watch the release of Initial Jobless Claims on Thursday for possible cracks in the labor market.

Aside from this, the highlight of the week is the release of US inflation figures on the consumer and producer side. If prices align with estimates, this would indicate a resumption of the disinflation process, barring any rate hikes by the Federal Reserve.

Across the southern border, Mexico´s inflation edged towards the Bank of Mexico (Banxico) goal of 3% plus or minus 1%, as revealed by the National Statistics Agency (INEGI). This is a relief for Banxico, which unanimously held rates unchanged on August 6, though it hinted that the balance of risks to inflation was tilted to the upside.

According to the Citi Mexico expectations survey, all the analysts expect Banxico’s main policy interest rate to remain unchanged at 6.50% towards the end of the year. At the same time, the median estimate is that the USD/MXN exchange rate would end this year at 17.90.

USD/MXN Price Forecast: Technical outlook

In the daily chart, USD/MXN trades at 17.1441, maintaining a bearish near-term bias as spot holds below the clustered simple moving averages around 17.40 and the descending resistance trend line projected from the 18.16 area near 17.44. The pair is trading under these key overlays, suggesting rallies remain capped, while the Relative Strength Index (14) near 33 points to weak but not yet oversold downside momentum that could allow further softening before a more meaningful bounce.

On the topside, initial resistance is seen at the grouped simple moving averages around 17.40, followed by the descending trend-line barrier near 17.44, where sellers are likely to re-emerge if the pair attempts a corrective rebound. On the downside, structural support is aligned with the longer-term trend-line break level near 15.66, leaving the intermediate space largely uncharted and implying that any renewed selling pressure could accelerate should intraday bounces fail to regain the 17.40–17.44 cap.