Democratic sweep lifts Mexican Peso ahead of Banxico decision

• A 1.29% decline takes USD/MXN to 18.59 after Democrats secure both chambers of Congress.
• Fresh sanctions risk reviving tensions, leaving the outlook for US-Iran talks unclear.
• A rate hold at 6.50% is expected from Banxico before Friday’s NFP release.

At 18.59, USD/MXN is down by over 1.29% as the Mexican peso strengthens against the US dollar following the Democrats’ sweep of the US midterm elections. Democrats are set to take control of both the US Senate and the House of Representatives in January 2027. The emerging-market currency could nevertheless lose ground, and the dollar gain support, if the US and Iran fail to reach an agreement.

USD/MXN falls as US election uncertainty recedes, but Iran tensions and Banxico’s rate decision present new risks

With US election risks now behind markets, attention has shifted to the Middle East. Citing Arab diplomatic sources, Al Jadeed reported that the direction of talks between Washington and Tehran would become clearer on Friday. Meanwhile, fresh Iran-related sanctions were announced by the US Treasury. US sources told Al Jadeed that the war is entering a delicate phase before the new US Congress takes office, during which the White House could choose to resume attacks on Iran.

At 54.5, the US ISM Services PMI signalled continued expansion in services activity, but fell short of the 54.8 forecast and eased from 54.9. Several components, including prices paid, declined, although the employment index registered a modest improvement.

Stronger-than-expected hiring by private companies was recorded in the ADP Employment Change report. Separate US figures showed that September’s trade deficit narrowed as goods exports reached a four-month high.

Thursday brings US jobless claims figures, before Friday’s Nonfarm Payrolls report provides a fresh assessment of the US labour market.

With no Mexican data releases on the calendar, traders are turning to Thursday’s monetary policy announcement from the Bank of Mexico (Banxico). Both the latest survey and the futures market point to rates remaining at 6.50%. According to Prime Terminal, the probability of a hold stands at 60%, compared with a 39% chance of a rate cut.

USD/MXN Price Forecast: Bullish bias holds

Trading at 18.6012 on the daily chart, USD/MXN retains a distinctly bullish bias. Spot is consolidating comfortably above the cluster of three simple moving averages, with the latest reading near 17.8508. It also remains firmly above the former descending resistance trend line, now a distant reference point around 14.7081. Meanwhile, the Relative Strength Index (14), at 56.53, has retreated from earlier overbought extremes, pointing to sustained but more measured upward momentum rather than exhaustion.

The area around the three simple moving averages at 17.85 offers the nearest indication of technical support and should provide an initial cushion during a pullback. Below that sits stronger horizontal demand at 16.89. A deeper retracement would probably encounter further structural support near 14.71, around the former trend-line breakout area, although reaching it would require a substantial reversal of the present bullish set-up.

(The technical analysis of this story was written with the help of an AI tool. Know more.)