Mexican Peso holds 18.42 as Trump, Sheinbaum signal trade breakthrough

The Mexican Peso holds firm against the US Dollar on Tuesday, amid a light economic docket in Mexico, with traders eyeing the release of Mid-Month Inflation figures for October. In the United States, housing data disappointed investors, and geopolitics are driving price action since the beginning of the week. The USD/MXN trades at 18.42, unchanged.

USD/MXN steadies as renewed US-Mexico trade optimism offsets fading carry-trade appeal

The emerging market currency has held its own, even though the carry trade has begun to fade since mid-September, amid speculation that the interest rate differential between the US and Mexico will narrow from 250 basis points to 200 by the end of the year.

Money markets had priced in 23 basis points of Fed tightening, which would bring the Fed funds rate into the 4%-4.25% range. Meanwhile, the Bank of Mexico is projected to keep the monetary policy unchanged in 2026 and 2027, holding its main interest rate reference at 6.50%.

Mexico’s President Claudia Sheinbaum commented that a trade deal with the US is “very close”, with some issues left to be resolved. Her counterpart, the US President Donald Trump, said that a “great trade deal with Mexico is very close.

This news is positive for Mexico, as the US is the largest trading partner, and a swift resolution of trade and tariff issues with Washington is supportive of the Mexican Peso. This news comes after the Wall Street Journal (WSJ) revealed on October 15 that progress on tariffs and a trade deal had halted.

Ahead, Mexico’s docket will feature Retail Sales and October’s Mid-Month Inflation report.

U.S. Pending Home Sales plunged 7.3% in September. This week, investors will watch Initial Jobless Claims for the week ending October 17, S&P Global Flash PMIs, and the University of Michigan’s final October Consumer Sentiment reading.

USD/MXN Price Forecast: Technical outlook

In the daily chart, USD/MXN trades at 18.4272, extending its advance above the clustered simple moving averages around 17.4761 and preserving a bullish near-term bias. The pair has pushed decisively away from the 16.8866 horizontal floor and is approaching the broader downward resistance trend line drawn from the 21.0808 peak, suggesting that the recent breakout sequence remains intact. The Relative Strength Index (14) at 67.78 hovers just below overbought territory, hinting that bullish momentum is still strong but vulnerable to bouts of consolidation as price nudges into this longer-term resistance environment.

On the downside, immediate support is now seen at the Moving Average Triple (simple) near 17.48, where any pullback could find underlying demand before the more distant horizontal support at 16.89 comes into play. On the topside, the next important barrier is the descending resistance trend line originating at 21.08, which currently caps the broader recovery and would need to be decisively cleared to open the way for a more extended USD/MXN rally.