Mexican Peso slumps as factory slowdown compounds US midterm anxiety

• At 18.84, USD/MXN gains more than 1.40% as uncertainty surrounds the US elections.
• A reading of 49.5 takes Mexico's manufacturing PMI into contraction.
• Robust US job openings and Factory Orders data underpin demand for the Dollar.

Trading at 18.84, USD/MXN is up more than 1.40% on Tuesday as the Mexican Peso (MXN) weakens against the US Dollar (USD). Developments in the US midterm elections are keeping investors cautious while they await the results and the eventual composition of the US Congress.

USD/MXN rallies as US election uncertainty, softer Mexican manufacturing and robust US data weigh on the Peso

Wall Street is on course to close higher, reflecting a positive market mood. In currency markets, however, emerging-market currencies, including the Peso, are losing ground to the Greenback.

Having recovered its earlier losses, the US Dollar Index (DXY) is edging 0.05% higher to 101.85. The index tracks the Dollar against six currencies. For the Mexican currency, pressure is coming from Middle East tensions and their effect on energy prices, alongside uncertainty over the US midterm election outcome.

Mexico's S&P Global Manufacturing Purchasing Managers Index (PMI) fell from 50.3 to 49.5 in September, signalling a contraction in manufacturing activity. Explaining the decline in output, companies cited “cash flow difficulties, inflationary pressures, raw material shortages and subdued sales.”

In its newly released survey of private-sector economists, the Bank of Mexico (Banxico) said it expects inflation to stay within its range of 3% plus or minus 1%.  Analysts also expect economic growth to fall short of the government’s 2% GDP forecast both this year and next, with Banxico leaving interest rates unchanged through the end of 2027.

September's US Job Openings and Labour Turnover Survey (JOLTS) showed an increase from 7.19 million to 7.5 million, a rise of 4.5% on the previous month. Separately, the US Census Bureau reported that monthly growth in Factory Orders accelerated from 0.3% to 1.8% MoM in September.

Attention among USD/MXN traders remains on the US midterm elections, with Polymarket assigning Democrats a 75% probability of winning the Senate and a 96% probability of controlling the House.

USD/MXN Price Forecast: Near-term bullish bias holds

At 18.8383 on the daily chart, USD/MXN retains a bullish near-term outlook. Spot remains well above the cluster of three simple moving averages, with the latest reading near 17.82 supporting the underlying uptrend. Horizontal support at 16.89 also lies comfortably below the pair. Meanwhile, the Relative Strength Index (14), at around 65 after retreating from earlier overbought levels, indicates solid rather than extreme bullish momentum.

The latest close, around 18.84, provides initial support on any decline. Below that sits the 50/100/200-day simple moving average zone near 17.82, followed by the more distant structural support marked by the horizontal line at 16.89. For the broader rally, the principal technical hurdle is the descending resistance trend line, currently projected at around 21.08.

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