Mexican Peso Surges to Two-Year High Even as Retail Sales Slip

The Mexican peso has risen to its strongest level since May 2024, pushing the USD/MXN pair to a two‑year low as the US dollar weakens, despite a pick‑up in services‑sector activity. The pair was trading around 16.92, down 0.22% for the week and 0.50% lower over the same period.

USD/MXN weakens on soft US Dollar and carry support

On Friday, the peso got a boost from improved market sentiment and a favorable carry trade, thanks to a 275‑basis‑point interest‑rate advantage over the US dollar. Meanwhile, the Dollar Index (DXY) was essentially unchanged at 98.84 for the day, yet it slipped more than 0.80% over the week.

Mexican retail sales disappointed, contracting 0.2% month‑over‑month in June after failing to meet the expected 0.1% gain, though the decline was less severe than May’s 0.6% drop. Over the past year, sales have risen from 1.6% to 2.7%, still below the projected 3.1% increase.

The Bank of Mexico’s minutes from Thursday showed policymakers remain wary of changing rates, even though they see inflation risks leaning upward. The board said the current stance is appropriate and warned that a worsening Middle East conflict could hurt global growth.

In the United States, the services sector posted stronger‑than‑expected growth in August, according to S&P Global, while manufacturing activity eased despite still expanding at a modest pace. The report noted that factory prices are under pressure from the US‑Iran conflict, which is disrupting commodity flows and lifting energy costs.

Geopolitical developments are also in focus. Iran’s president called for an end to the war, whereas the nation’s navy commander warned that a “historic lesson” awaited the adversary.

Looking ahead, Mexico’s calendar includes inflation figures for the first half of August, second‑quarter GDP and the current‑account balance. In the US, market participants will watch for Treasury Secretary Bessent’s announcement of new Iran sanctions on Monday, the PCE inflation report, preliminary BLS benchmark revisions, and remarks from Fed Chair Warsh at the Jackson Hole symposium.

USD/MXN Price Forecast: Technical outlook

On the daily chart, USD/MXN is trading at 16.9206, extending its slide beneath the recent range and maintaining a bearish short‑term bias. The price sits below a cluster of simple moving averages, with the triple SMA near 17.3393 providing overhead resistance, while a descending trend line from 18.1651 marks resistance around 17.0838. The 14‑day RSI at 27.3 is edging into oversold territory, suggesting extended downside pressure without yet indicating a clear rebound.

Upside resistance first appears at the same descending trend line from 18.1651, near 17.0838, followed by the triple SMA barrier around 17.3393. A broader descending line from 21.0808 creates resistance around 18.1200. Because there are no clear support levels from moving averages or trend lines beneath the current price, any rebound from the 16.90 zone would probably be corrective unless the pair can break back above 17.0838 and then test the SMA cluster near 17.3393.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Source link