How is a Democratic sweep driving Mexican Peso gains ahead of Banxico’s decision?

• USD/MXN drops 1.29% to 18.59 as Democrats secure a congressional sweep.
• Renewed tensions loom over uncertain US-Iran talks following fresh sanctions.
• A 6.50% rate hold is expected from Banxico before Friday’s NFP release.

The Mexican Peso has strengthened against the US Dollar, sending USD/MXN down by over 1.29% to 18.59 after the Democratic sweep in the US midterm elections. Democrats are set to take control of both the US Senate and the House of Representatives in January 2027. However, the absence of a US-Iran agreement could reverse the emerging-market currency’s gains and lend support to the Greenback.

Can USD/MXN extend its decline as US election risks recede and Iran tensions and Banxico’s rate decision come into focus?

Attention has shifted to the Middle East now that US election risks have receded. 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 have been 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.

Growth in US services activity fell short of expectations, with the ISM Services PMI easing to 54.5 from 54.9 against a forecast of 54.8. Several components, including prices paid, moved lower, although the employment index registered a modest improvement.

Separately, the ADP Employment Change report showed that hiring by private companies exceeded expectations. The US trade deficit also narrowed in September as goods exports reached a four-month high.

Thursday’s US calendar brings jobless claims data, ahead of Friday’s Nonfarm Payrolls report, which will provide an update on US labour market conditions.

With no data releases on Mexico’s calendar, traders are awaiting Thursday’s monetary policy announcement from the Bank of Mexico (Banxico). The latest survey and 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: Does the Technical Picture Still Favour the Upside?

A clear bullish bias remains intact on the daily chart, where USD/MXN is trading at 18.6012 and consolidating comfortably above the cluster of three simple moving averages, with its latest reading near 17.8508. The former descending resistance trend line is also well below the pair, providing a distant reference around 14.7081. At 56.53, the Relative Strength Index (14) has retreated from earlier overbought extremes, signalling sustained but more measured upward momentum rather than exhaustion.

Any pullback should first encounter support in the triple simple moving average zone at 17.85, followed by stronger horizontal demand at 16.89. If the retracement deepens, the previous trend-line breakout area near 14.71 would likely offer further structural support. Reaching that region, however, would require a substantial reversal of the prevailing bullish setup.

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