18.75 in sight for Mexican Peso as Iran risks and AI sell-off weigh on sentiment

• 18.70 reached in USD/MXN as safe-haven flows underpin Dollar.
• 3.62% mid-month inflation in Mexico tops market forecasts as price growth quickens.
• Peso carry trades face risks from potential Fed tightening and a prolonged Banxico pause.

The Mexican Peso fell 0.16%. It marked a second consecutive day of losses as the US Dollar remained resilient. Escalating Middle East tensions and concerns over mega tech companies taking on more debt to fund the AI buildout weighed on investors. USD/MXN is trading at 18.72, a gain of 0.20%.

Middle East escalation lifts US Dollar

Risk appetite deteriorated as the US-Iran conflict intensified. Washington and Jerusalem are drawing up plans to restart attacks on Iran following the US elections. An exchange of attacks between Saudi Arabia and the Houthis sent energy prices sharply higher, in turn strengthening the greenback.

Mexico-US rate gap supports USD/MXN gains

Expectations of a 25 bps rate increase by the Federal Reserve towards the end of 2026 helped USD/MXN renew its advance. By contrast, the Bank of Mexico (Banxico) is expected to leave rates on hold in 2026 and throughout 2027.

Data from national statistics agency INEGI showed Mexican inflation accelerating from 3.42% to 3.62% in the first half of October, above the 3.60% forecast. Over the same period, core inflation eased from 3.79% to 3.78%, against expectations of 3.70%. The core measure excludes volatile components such as food and energy.

US Initial Jobless Claims remained close to 200k, consistent with an economy characterised by limited hiring and firing. Corporate earnings also remain under scrutiny. Post-results declines in Tesla and Meta dampened broader risk appetite and fuelled a fresh sell-off in AI stocks.

The previous week brought above-forecast US inflation readings for both consumers and producers. Those figures reinforced the case for at least one Federal Reserve interest rate increase towards the end of the year.

Mexico’s October Retail Sales and Mid-Month Inflation figures are next on investors’ radar. The US calendar includes jobless claims for the week ending October 17 and S&P Global Flash PMIs, alongside the University of Michigan’s final October Consumer Sentiment reading.

USD/MXN Price Forecast: Bullish technical bias holds

At 18.7197 on the daily chart, USD/MXN retains a distinctly bullish bias. The pair stands well above the 50-, 100- and 200-day simple moving averages (SMAs), which converge around 17.54. Its upward breakout extends the rally from the mid-16.00s. A Relative Strength Index (14) reading of 73.87 signals overbought conditions: upward momentum is still strong, but looks stretched.

The longer-term descending trend line drawn from 21.0808 represents the next significant resistance. It caps the broader chart structure and could restrain further advances. Below current levels, the first support lies around 17.54 at the 50/100/200-day SMA cluster. Beyond that, horizontal support sits near 16.89, where buyers would be expected to return in the event of a deeper correction.

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