USD/MXN remains steady below 18.00, near 2017 lows

The Mexican peso continues to trade sideways in the short-term, near 2017 highs against the US dollar. A month ago, USD/MXN started to move in the current range, between 17.60 and 17.97. 

The pair continues to consolidate, unaffected by the 8.1 earthquake that hit Mexico, back on September 8. The potential negative impact of the earthquake and tensions in NAFTA negotiations were offset by a rally in crude oil prices and by optimistic expectations of the economic performance of Mexico in the near-term.

Fed and Banxico 

A week from now, the Federal Reserve will announce its decision on monetary policy. No change in rates is expected and some analysts estimate that there could some decision reading the normalization process of the balance sheet. 

It the Fed remains on hold, Banxico could do the same September 28 when its Board meets. At the last meeting, the Mexican central bank kept rates unchanged, ending a long tightening cycle. Since then inflation rose further and the peso remained steady. Policymakers project that inflation is near its peak and will start falling in the near-term, so they see no need to keep rising rates, at the moment. 

USD/MXN levels to watch 

The key level to the upside is seen at the 18.00 psychological area that is offering resistance since July. A consolidation on top, would open the doors for a US dollar bullish correction. 

On the downside, the key support is the 17.45/50 zone, near the 2017 low. A break lower could expose 17.00/10. In the short-term, 17.60 has become also a strong support, protecting the 17.45/50 area.