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The Mexican Peso gains strength amid attention on Trump's "Big Beautiful" tax bill.
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US developments and the US Dollar’s performance remain key drivers of the USD/MXN exchange rate.
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The USD/MXN pair falls to a seven-month low, fueled by renewed US Dollar weakness.
The Mexican Peso (MXN) strengthened against the US Dollar (USD) on Tuesday, reaching a fresh year-to-date high as markets grew cautious ahead of Wednesday’s House vote on President Trump’s “One Big Beautiful Bill.” Uncertainty surrounding the proposed tax package weighed on the USD, with investors evaluating its potential impact on US fiscal policy and debt levels. This added pressure on the Greenback allowed the Peso to gain momentum during European trading, with USD/MXN slipping 0.15% to trade below the key 19.30 level.
The USD/MXN remains heavily influenced by shifts in US Dollar sentiment, driven by fiscal policy developments, economic data, and Fed signals. The upcoming vote on the tax bill, which seeks to extend the 2017 Tax Cuts and Jobs Act and introduce new relief measures, has raised concerns about rising federal deficits and long-term debt sustainability, weighing on the USD.
Fed officials, including Thomas Barkin, Alberto Musalem, Adriana Kugler, Raphael Bostic, Mary Daly, and Beth Hammack, are scheduled to speak today, with markets looking for clues on the Fed’s policy stance amid economic uncertainty. Adding to the USD’s challenges, Moody’s recently downgraded the US sovereign credit rating, increasing perceived credit risk and potentially raising US interest rates to attract investors.
Looking ahead, Mexico will release March retail sales on Wednesday, followed by May’s mid-month inflation and Q1 GDP data on Thursday. In the US, preliminary Purchasing Managers Index (PMI) figures for May and April’s Existing Home Sales data are also expected Thursday. These releases will likely influence USD/MXN’s near-term direction, as the pair remains sensitive to economic indicators that affect growth, inflation, and central bank outlooks in both countries.
Technically, USD/MXN has dropped to its lowest level since October, breaking below the former psychological support, now resistance, at 19.30. Prices remain under a descending trendline from April, with the Relative Strength Index (RSI) at 36.19 signaling growing bearish momentum. Since RSI near 30 is considered oversold, the downtrend is intact, with the next key support seen at the 19.20 level.
If prices drop below 19.20, the pair could test the October low around 19.11, potentially heading toward the 19.00 level.
Conversely, if the US Dollar regains strength and breaks above the descending trendline, USD/MXN may retest the April low near 19.47, with the 20-day Simple Moving Average (SMA) at 19.53 coming into focus.
USD/MXN daily chart
