Mexican Peso softens as Middle East risks boosts the US Dollar

The Mexican Peso weakens against the US Dollar on Monday, with USD/MXN reclaiming the 17.00 level, even though the latest US inflation and Retail Sales data disappointed investors. The USD/MXN trades at 17.03, after hitting a weekly low of 16.99.

USD/MXN eases despite softer US data as traders await Banxico minutes

Last week’s US data was softer than expected, prompting investors to trim their hawkish bets that the Fed might raise rates at the September meeting. The Consumer Price Index (CPI) for July expanded by 3.4% YoY, down from 3.5% in July, while the Producer Price Index (PPI) slowed from 5.5% to 4.7% for the same period.

Both reports revealed progress in the disinflation process, while Friday’s Retail Sales report showed that consumer spending is easing, with sales falling from 0.2% to -0.6%.

The data pushed the US Dollar Index (DXY) to trade near two-month lows, before recovering some ground. The DXY, which measures the performance of the Greenback against six currencies, is down 0.05% at 99.59.

Uncertainty about the war in the Middle East could have weighed on the Mexican currency. US President Donald Trump said that he is not in a hurry to end the war with Iran, though he added that they would not seek an extension to the 60-day truce agreed in the Memorandum of Understanding (MoU), which ends on August 17.

Across the southern border, the Mexican economic docket remained absent last week, but in August 20, the Bank of Mexico – also known as Banxico- is expected to release its latest meeting minutes, which are expected to show board members' stances on the economy and monetary policy.

The docket will resume on Friday, August 21, with traders awaiting Mexican Retail Sales for June, which are expected to surge from 1.6% to 3.1% YoY due to the World Cup.

USD/MXN Price Forecast: Technical Outlook

In the daily chart, USD/MXN trades at 17.0331. The pair retains a bearish near-term bias as spot holds well below the clustered simple moving averages around 17.37 and beneath both descending trend-line resistances, suggesting rallies remain capped within a broader downside structure. The Relative Strength Index (14) sits just under the 30 line, hinting at oversold conditions but not yet showing a decisive recovery in momentum.

On the topside, initial resistance is defined by the triple simple moving average area near 17.37, with the two descending resistance trend lines reinforcing a broader supply zone above that region. As long as price remains under these caps, the path of least resistance stays to the downside, and any bounce toward 17.37 would likely be viewed as corrective within the prevailing bearish phase.