Mexican Peso strengthens as Banxico hold extends 10-day rally

The Mexican peso extends its rally to 10 straight days, gaining over 0.12% on Thursday after the Bank of Mexico (Banxico) left interest rates unchanged. At the time of writing, the USD/MXN exotic pair trades at 17.21, after reaching a daily high of 17.26.

USD/MXN drops after Banxico holds rates at 6.50%

Banxico held rates at 6.50% for the second straight meeting, unanimously, after finishing its easing cycle on May 7. In the monetary policy statement, the central bank acknowledged that “Both headline and core inflation are still expected to decline throughout the forecast horizon, albeit more gradually than previously anticipated.”

The Mexican institution hinted that rates would remain at the current level for the foreseeable future, as the board expects both headline and core inflation to reach its 3% goat in Q4 2027, according to the bank’s projections. For 2026, they expect headline and core CPI to end at 3.5%.

Banxico mentioned that economic slack is anticipated to persist throughout the forecast period, and substantial downward risks to economic activity remain.

Aside from this, US jobs data was positive, as initial jobless claims for the week ending August 1 were 199K, above the previous week but below estimates of 202K. Meanwhile, the US Challenger Job Cuts revealed that planned layoffs dropped 27% to 33,429 in July, its lowest level in two years.

St. Louis Fed President Alberto Musalem was hawkish, reiterating that “inflation is well above the 2% target” and acknowledging that the balance of risks is that inflation will remain above target. Musalem added that “It is crucial that monetary policy put a meaningful restraint on underlying inflation, rather than tolerating somewhat higher inflation today to pursue productivity growth tomorrow.”

In the meantime, money markets continued to price in a 58% chance that the Fed will raise rates by 25 basis points at the September 16 meeting, according to Prime Terminal data.

Ahed this week, the US schedule will feature July’s Nonfarm Payrolls, which are projected to improve from 57,000 to 80,000 and the Unemployment Rate to remain steady.

USD/MXN Price Forecast: Technical outlook

In the daily chart, USD/MXN trades at 17.2109, extending its decline below the clustered simple moving averages, with the latest triple SMA reading at 17.4104 acting as nearby overhead resistance. Price also remains under the more recent downward resistance trend line break at 17.4630, keeping the pair in a bearish near-term bias, while the Relative Strength Index (14) at 36.18 drifts toward oversold territory, hinting that selling pressure is still dominant but increasingly stretched.

On the topside, initial resistance aligns at the triple simple moving average cluster around 17.4104, followed by the downward resistance trend line break near 17.4630, where any recovery would likely stall unless buyers can secure a daily close above this zone. On the downside, the next notable structural floor emerges much lower at the prior major trend-line break around 15.7056, with the current setup suggesting rallies toward the 17.41–17.46 band may be viewed as opportunities for sellers while the price holds beneath these caps.