- The Mexican Peso extends gains against the US Dollar.
- Low liquidity on Memorial Day may result in increased volatility on Tuesday.
- USD/MXN remains in a downtrend with resistance firming at 19.30.
The Mexican Peso (MXN) is experiencing a steady appreciation against the US Dollar (USD) on Monday, reflecting lingering uncertainty in the United States (US) economic outlook amid concerns about US President Donald Trump’s tariff threats and the country’s fiscal outlook.
With US markets closed for Memorial Day on Monday, the Mexican Peso remains resilient, with the USD/MXN pair trading at around 19.19, down 0.33%, at the time of writing.
As participants keep an eye on US Treasury yields and remarks from US policymakers, they should be aware of the limited liquidity in the US market due to the holiday weekend.
On this week’s economic agenda, the fate of the USD/MXN will likely remain at the mercy of the Greenback and insights provided by the Fed meeting minutes on Wednesday.
Market participants are particularly focused on the release of the Fed’s preferred inflation measure, the US core Personal Consumption Expenditures (PCE) data for April, as well as the University of Michigan consumer sentiment data, which are scheduled for Friday.
These data points are crucial for understanding inflation and consumer sentiment trends, and gauging how US citizens feel about the current economic situation, both of which are important factors that may influence expectations regarding when the Federal Reserve (Fed) might consider cutting interest rates.
Mexican Peso daily digest: USD/MXN faces pressure due to renewed US Dollar weakness
- The US credit rating downgrade, rising expectations of increased US debt levels, and a sell-off in the bond market have placed the resilience of the USD under significant scrutiny.
- The USD struggles to gain ground as investors digest US President Donald Trump’s decision to extend EU tariffs until July 9. The announcement on Monday cheered risk markets, as traders see it as an opportunity for negotiations between the two significant economies.
- On Friday, Trump had threatened to impose 50% tariffs on European Union imports and 25% tariffs on Apple and Samsung smartphones, rattling markets.
- The persistent threats of tariffs from President Trump directed at international counterparts are undermining investor confidence, thereby challenging the USD’s status as the preferred reserve currency.
- On Tuesday, US Consumer Confidence data, which gauges Americans’ views about the economy and finances, will be released.
- Wednesday’s agenda will see the publication of the minutes from the May Federal Open Market Committee (FOMC) meeting, offering insights into interest rate discussions, alongside public statements from Fed members providing additional context for future monetary policy.
Mexican Peso technical analysis: USD/MXN pressures support with October low in focus
USD/MXN remains entrenched in a firm downtrend, hitting a new year-to-date low just below 19.20 at the time of writing.
Price action continues to hover below both the 10-day and 20-day Simple Moving Averages (SMA), which act as dynamic resistances at 19.34 and 19.47, respectively.
Momentum indicators remain weak, with the Relative Strength Index (RSI) parked at 35.79, suggesting that while bearish momentum, the market is not yet in oversold territory.
With downside pressure building, attention now shifts to the October low at 19.11, which serves as the next major support.
A sustained break below this level could open the door to deeper declines toward 19.00, while any rebound would first need to reclaim 19.47 to shift short-term sentiment.
USD/MXN daily chart
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
