Mexican Peso sinks as US-Mexico trade talks stall, amid a soft USD

The Mexican Peso lost ground against the Greenback on Friday amid broader US Dollar weakness, as Mexico’s economic docket is absent, leaving traders leaning into US dynamics. The USD/MXN trades at 18.49, up 0.47%.

USD/MXN climbs toward 18.50 as stalled trade negotiations undermine Peso sentiment

Talks between the US and Mexico on a trade deal and tariff reductions have stalled, as the Wall Street Journal reported that Commerce Secretary Howard Lutnick is opposing reductions in 25% tariffs on Mexican autos and 50% levies on steel and aluminum.

Meanwhile, Mexico's deputy trade minister, Luis Rosendo Gutierrez, told the Journal that negotiations were making progress. A swift resolution on this matter would be positive for the Mexican Peso, bringing some stability with its largest trading partner,

In the US, Industrial Production in September rose to 0.7% MoM, exceeding estimates of 0.4% and the prior month’s 0.1% expansion. Aside from this, the docket was scarce on Friday; traders are still digesting this week’s inflation data, which has increased the chances of a December rate hike by the Federal Reserve.

Earlier, Fed Chair Kevin Warsh discussed the global economy, the AI boom, and yields. On monetary policy, he said, “We made very clear that we would deliver price stability, and we removed a dose of accommodation about a month ago.”

For the October meeting, the chances of a hike collapsed to 14%, down from above 50%, on the initial reaction to the US CPI, revealed Prime Terminal. For the December meeting, the probability of a 25-basis-point increase is 89%.

Next week, Mexico’s economic docket will be busy with Retail Sales, the release of mid-month inflation, jobs data and the Economic Activity indicator, usually a prelude of GDP. In the US, the schedule will be light, featuring housing data, Initial Jobless Claims and Flash PMIs.

USD/MXN Price Forecast: Technical outlook

In the daily chart, USD/MXN trades at 18.4915, extending its advance well above the clustered simple moving averages around 17.4234 and the former downward trend-line resistance now turned support near 18.1200, which together suggest a bullish near-term bias. The pair is holding far from the horizontal floor at 16.8866, while the 14-period Relative Strength Index at 71.0 edges into overbought territory, hinting that upside momentum remains strong but increasingly stretched.

On the downside, immediate support emerges at the recent breakout area around 18.1200, followed by the grouped 50-, 100- and 200-day simple moving averages near 17.42, which reinforce the broader bullish structure if tested. A deeper pullback would expose the horizontal base at 16.89, but as long as price holds above these underlying demand levels, USD/MXN would likely remain supported on dips despite the overbought signal from momentum.