Mexican Peso carry cushion thins as USD/MXN breaks 100-day SMA

The Mexican Peso extended its downward trajectory for a third consecutive session, falling more than 0.43% as USD/MXN advanced to 17.29, successfully clearing its 100-day Simple Moving Average at 17.26. The currency pair has found strong support from a narrowing interest rate differential between Mexico and the United States. Following the Federal Reserve's recent 25-basis-point rate hike to the 3.75%–4.00% target range and the Bank of Mexico pausing at 6.50%, the spread narrowed to 2.50%, marking its lowest level since 2015. Additional domestic headwinds emerged from softer-than-expected Mexican economic data, where August retail sales contracted by 0.1% month-over-month against forecasts of a 0.2% expansion. Hawkish commentary from Federal Reserve officials has further dampened appetite for the Mexican Peso, with markets pricing in high probabilities of additional US rate hikes later in the year. From a technical perspective, USD/MXN exhibits a bullish near-term bias above the 50/100/200-day SMA cluster at 17.1558, supported by an RSI standing at 65.1. A sustained move above current levels leaves initial resistance at the descending trendline of 18.1651.