Mexican Peso stays at 18.42 amid trade breakthrough signals from Trump and Sheinbaum

• USD/MXN remains at 18.42 ahead of inflation data watched by Peso traders.
• A trade agreement is nearing completion, Trump and Sheinbaum indicate
• Peso’s carry-trade appeal faces pressure as the US-Mexico interest rate gap narrows.

October’s mid-month inflation figures are in focus for traders on Tuesday, with Mexico’s economic calendar otherwise light and the Mexican Peso remaining steady against the US Dollar. Disappointing US housing figures have weighed on investors, while geopolitical developments have shaped price movements since the start of the week. USD/MXN is unchanged at 18.42.

USD/MXN holds steady as fresh US-Mexico trade hopes counter waning carry-trade appeal

Speculation that the US-Mexico interest rate gap will shrink from 250 basis points to 200 by year-end has eroded the carry trade’s appeal since mid-September. Despite this, the emerging-market currency has remained resilient.

A Fed tightening of 23 basis points had been priced into money markets, implying a Fed funds rate of 4%-4.25%. By contrast, projections for the Bank of Mexico point to unchanged monetary policy in 2026 and 2027, with its benchmark interest rate remaining at 6.50%.

With some outstanding issues still to resolve, Mexico’s President Claudia Sheinbaum described a trade agreement with the US as “very close”. US President Donald Trump, her counterpart, said a “great trade deal with Mexico is very close.”

Given that the US is Mexico’s largest trading partner, the development is favourable for Mexico. A prompt settlement of trade and tariff disputes with Washington supports the Mexican Peso. The latest news follows the Wall Street Journal’s (WSJ) revelation on 15 October that progress towards a tariff agreement and trade deal had stalled.

Retail Sales and the October Mid-Month Inflation report are next on Mexico’s economic calendar.

September brought a 7.3% fall in US Pending Home Sales. Investors’ attention this week will turn to Initial Jobless Claims for the week ending 17 October, S&P Global Flash PMIs and the final October Consumer Sentiment reading from the University of Michigan.

USD/MXN Price Forecast: Advance continues towards trend-line resistance

Trading at 18.4272 on the daily chart, USD/MXN is building on its rise above the cluster of simple moving averages around 17.4761, keeping the near-term outlook bullish. A decisive move away from horizontal support at 16.8866 has brought the pair closer to the broader descending resistance trend line from the 21.0808 high. This suggests the recent series of breakouts remains intact. At 67.78, the Relative Strength Index (14) sits just short of overbought territory. Upward momentum therefore remains strong, although consolidation is a risk as the price approaches this longer-term resistance area.

The Moving Average Triple (simple), near 17.48, now provides the first downside support, where buying interest could cushion a pullback before the more distant horizontal level at 16.89 is tested. Above the current price, the descending resistance trend line from 21.08 represents the next significant hurdle. It continues to limit the broader recovery, and a decisive break above it would be needed to pave the way for a more sustained USD/MXN rally.

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