Mexican Peso defies US Dollar strength as Iran peace hopes lift sentiment

The Mexican Peso (MXN) registers gains against the US Dollar (USD) on Monday, as USD/MXN edges down 0.57% amid improving risk appetite and US tech stocks rising on Anthropic's IPO filing, while the Greenback posts solid gains versus major FX currencies. At the time of writing, USD/MXN trades at 18.56.

USD/MXN retreats as diplomatic optimism supports risk-sensitive currencies ahead of Fed decision

Sentiment is positive amid growing speculation that talks between Iran, Turkey, Pakistan and Saudi Arabia – the Mecca Pact members – can solve the conflict between the US and Iran. Nevertheless, an Iranian official said nuclear talks were excluded. In the meantime, Iran’s President Pezeshkian said that dialogue must be free of threats and pressure, while newswires reported that the US is ready for strikes within 96 hours of US President Donald Trump orders.

Back to economics, investors are waiting for the Federal Reserve's (Fed) meeting on Tuesday and Wednesday. Money markets have priced in a 9% chance of a hike, while for December odds are at 83%, down from around 90% the previous week, according to Prime Terminal.

Traders await US Personal Consumption Expenditures data, the Fed's preferred inflation gauge, for interest-rate clues, while investors prepare for the November 3 US midterm elections.

In Mexico, the docket was empty, but traders eye the release of the Balance of Trade on Tuesday and Gross Domestic Product (GDP) figures on Friday.

USD/MXN Price Forecast: Technical outlook

In the daily chart, USD/MXN trades around 18.5650, extending its advance well above the clustered simple moving averages (SMA) pack at 17.6061 and keeping a firm bullish near-term bias. The pair is pressing into fresh highs beyond the prior downward resistance trendline, while the 14-day Relative Strength Index at 65.9 stays in positive territory but shy of overbought, suggesting strong yet not extreme upside momentum as price consolidates at elevated levels.

On the downside, immediate support is now seen at the SMA cluster near 17.61, which should act as the first buffer on any corrective pullback, ahead of the more distant horizontal floor at 16.89. With no clearly defined resistance levels from the current dataset overhead, upside progress would likely be driven by momentum and sentiment until a new technical barrier is carved out by price action.