The Mexican Peso continued its sharp depreciation against the US Dollar, with the USD/MXN currency pair rallying over 1.25% to trade at 17.50, marking its highest level in nearly two months [1]. This move was driven by broad US Dollar strength, as the US Dollar Index (DXY) climbed more than 0.57% to surpass 101.00 for the first time since late July [1]. The rally in the Greenback was underpinned by hawkish commentary from Federal Reserve officials, which fueled speculation that the Fed may raise interest rates more than once. Notably, Boston Fed President Susan Collins highlighted elevated inflation risks and supported further rate increases, while Richmond Fed President Thomas Barkin warned that inflationary shocks could persist, and Fed Governor Michael Barr indicated that additional hikes may be necessary to achieve the 2% inflation target [1].
US economic data also contributed to the Dollar's strength, as S&P Global reported that business activity in both the manufacturing and services sectors expanded in September, exceeding both estimates and August's figures [1]. As a result, investors are now pricing in nearly 93 basis points of Fed tightening by the end of 2027 [1].
In contrast, the Mexican Peso faced pressure ahead of the Bank of Mexico (Banxico) monetary policy decision scheduled for September 24. According to Prime Terminal, money markets had priced in a 79% probability that Banxico would keep its benchmark rate unchanged at 6.50% [1]. The narrowing interest rate differential between the US and Mexico, now at its tightest since 2015, has further weighed on the Peso [1].
From a technical perspective, USD/MXN broke above its 200-day Simple Moving Average (SMA) at 17.42, opening the door for a test of the 17.50 level. The Relative Strength Index (RSI) has turned overbought for the first time since early August 2024, suggesting potential for further upside. If the pair clears 17.50, the next resistance levels are seen at 18.00, 18.16 (March 31 high), 18.53 (November 25, 2025 high), and 18.77 (November 5 peak). On the downside, support is found at the 200-day SMA (17.42), followed by the 100-day SMA (17.26), 50-day SMA (17.15), and the 17.00 level [1].
Looking ahead, market participants are watching upcoming US Initial Jobless Claims data and further Fed commentary for additional cues [1].
CONCLUSION
The Mexican Peso's selloff has intensified due to hawkish Fed signals and robust US economic data, pushing USD/MXN to its highest level in nearly two months. With Banxico expected to hold rates steady and the interest rate differential narrowing, the Peso remains under pressure. Technical indicators suggest further upside for USD/MXN if key resistance levels are breached.