The Mexican peso weakened against the US dollar on Monday, with USD/MXN back above 17.00 and trading at 17.03, ending a four-day losing run. The move came even after softer US data reduced expectations of further tightening: July CPI rose 3.4% year on year versus 3.5% in June, while PPI eased from 5.5% to 4.7% over the same period. Retail Sales then fell from 0.2% to -0.6%, pushing the US Dollar Index towards two-month lows before it steadied, down 0.05% at 99.59.
Geopolitical risk also supported the greenback, with uncertainty around the Middle East war and a 60-day truce under an MoU that expired on Monday. Mexico had no major releases last week, but Banxico is due to publish minutes on 20 August. Attention then turns to June Mexican Retail Sales on Friday, expected to accelerate from 1.6% to 3.1% year on year, while technical levels show USD/MXN below clustered simple moving averages near 17.37 and the RSI (14) just under 30.
Derivatives Strategies Ahead Of Key Central Bank Events
As we approach the Bank of Mexico’s minutes release on August 20, derivative traders should prepare for sudden shifts in the USD/MXN pair. We recommend using short-term option straddles to capture sharp price swings without picking a directional side. This strategy is especially useful as Banxico continues to manage stubborn inflation, which has recently hovered around 4.6% in 2026.
The technical outlook shows that USD/MXN faces strong resistance near the 17.37 level, keeping the broader trend bearish. While Middle East tensions have temporarily strengthened the US Dollar, we view this bounce as a temporary correction. Traders should consider selling out-of-the-money call options near 17.37 to benefit from this overhead ceiling.
Retail Sales In Focus And Long-Term Peso Drivers
We also need to watch Friday’s Mexican retail sales, which are projected to jump to 3.1% year-over-year. Strong retail performance typically boosts the Peso, which could quickly push USD/MXN back toward the 17.00 mark. Buying short-dated put options on USD/MXN before the announcement offers a low-risk way to play a Peso recovery.
Looking at the bigger picture, Mexico’s high interest rates still offer a lucrative yield advantage over the US Dollar. Additionally, robust foreign direct investment, which surpassed $35 billion last year, supports the Peso’s long-term strength. Therefore, we advise using any temporary US Dollar rallies in the coming weeks to accumulate bearish positions on USD/MXN.
