Mexican Peso retreats as USD/MXN bounces from near YTD low

The Mexican Peso loses some ground against the US Dollar as USD/MXN rises by over 0.09% amid a sour market mood and the strength of the Greenback, ahead of the September 16 FOMC monetary policy decision. The exotic pair trades at 17.15, after hitting a yearly low of 17.10.

USD/MXN gains momentum as markets nearly lock in September Fed hike

The latest inflation report on the producer and consumer front in the United States pushed investors to price in a Fed rate hike on September 16. Even though most of the data was in line with forecasts, the jump in headline PPI to 5.4% may have driven the market's move.

This, alongside a strong August Nonfarm Payrolls report and Fed Chair Kevin Warsh putting inflation at the forefront and confirming that the labour market is “consistent with full employment,” cemented the case for moving the Fed funds rate to 3.75%-4%.

In addition, the escalation of the Middle East conflict, which pushed energy prices higher and Oil above the $100 milestone, could be among the reasons the Fed is considering a pre-emptive rate hike.

Earlier, the UD ADP Employment Change 4-week average continued to improve, exceeding the previous week's upwardly revised print of 16.25K, up from 12.25K, indicating labour market strength.

In Mexico, the Bank of Mexico (Banxico) has kept interest rates at 6.50% since May 2026, in a meeting in which the central bank announced that the easing cycle was practically over. Although Banxico acknowledged that the risks of inflation are tilted to the upside, last week’s 12-month inflation print was below estimates of 3.3%, coming at 3.26%, but near the central bank’s 3% plus or minus 1% objective.

Ahead, Mexico’s economic docket will feature Retail Sales on September 22, followed by inflation readings for the first half of September on September 23, before Banxico’s meeting.

USD/MXN Price Forecast: Technical Outlook

In the daily chart, USD/MXN trades at 17.1498. The pair remains below the latest simple moving average from the 50/100/200-day triple set at roughly 17.18, keeping the near-term bias capped despite the recent bounce from sub-17.00 levels. The Relative Strength Index (14) has recovered toward 60, hinting at improving momentum, but with price still trading under the main moving average and within the context of broader descending resistance lines, rallies look vulnerable to selling pressure.

On the topside, immediate resistance is seen at the simple moving average near 17.18, with the broader downward trend-line structure reinforcing supply higher up. On the downside, initial support is located at the horizontal level around 16.89; a break below this floor would reopen the path toward the prior cycle lows, whereas holding above it would keep the pair consolidating beneath the 17.18 cap.