Market Mindset LATAM

Support & Resistance

• Support Levels:
  • 62,000–62,500: MA + minor base from recent weeks.
  • 58,500–59,000: Last breakout base and red step support.
• Resistance Levels:
  • ~64,000–64,500: Current all-time high zone — being tested.
  • 65,000+ becomes the psychological ceiling if breakout occurs.
• Price is consolidating at resistance, suggesting a breakout attempt may be imminent
• MACD likely still positive, though possibly flattening due to the recent sideways consolidation.

Monetary Policy & Inflation

Inflation is expected to reach the target range by mid-2026, according to Banxico forecasts. The Bank of Mexico (Banxico) cut its benchmark interest rate to 7.75% in August 2025, slowing the pace of its easing cycle due to persistent core inflation.

Economic Growth & Outlook

2025 GDP Growth Outlook. The OECD projects ~0.4% growth in 2025.

Drivers & Constraints

Nearshoring continues to drive activity in industrial real estate, logistics, and northern manufacturing hubs.

However, household consumption, credit, and public investment remain soft.

Manufacturing exports are under pressure due to slower U.S. growth and global trade tensions.

Fiscal Policy & Structural Initiatives

The government maintains a moderate fiscal stance, balancing social spending with revenue growth from higher oil prices and taxes.

Public debt remains relatively low at ~50% of GDP.

External Sector & Trade Dynamics

Export Dependence, Mexico’s growth remains heavily reliant on U.S. demand, especially for vehicles, electronics, and appliances. A soft U.S. economy in late 2025 is weighing on export momentum.

SMCA & Trade Policy. The USMCA review in 2026 is on the horizon. Disputes over labor rules, energy policy, and content origin standards are already drawing scrutiny. Mexico is preparing negotiation teams to preserve trade certainty and market access.

Currency Performance. The Mexican peso (MXN) appreciated to ~18.5 per USD, supported by interest rate differentials and carry-trade demand. Analysts see room for stabilization or mild depreciation if rate cuts accelerate or global volatility rises.

Political & Policy Environment

2025 General Elections. The June 2025 elections resulted in the continuation of the ruling coalition, offering policy continuity. However, concerns remain about regulatory clarity, especially in energy and judicial reform. Policy Priorities for 2026

Support Levels:

~60,000: Near-term support and moving average zone.

~58,000: Red step level, prior base from late August.

Resistance Levels:

~63,000: Current high and blue step resistance.

If broken, opens path to new highs and potential transition to Stage 10 (Thrill).

Key Insight: Currently consolidating just below resistance — a breakout would confirm trend extension.

MACD (Inferred)

Based on price behavior: MACD is likely positive, but may be showing early loss of momentum. No signs of divergence yet, but sideways action suggests pause or digestion.

Key Insight: Still bullish momentum, but watch for flattening signals or bearish crossover.

Support Levels:

55,500 – recent red step; near prior base.

57,500 – dynamic support level with 50-day MA proximity.

Resistance Levels:

Recently broken: 59,700.

Current resistance is psychological/round-number based (63,000–65,000), as market is in price discovery.

MACD

Based on price behavior and strong trend acceleration: MACD is likely positive and above signal line.

Bullish momentum is strong and confirmed. No visible signs of exhaustion, momentum supports continuation.

Monetary Policy & Inflation

Interest Rate Trend. The Bank of Mexico (Banxico) has reduced the benchmark rate gradually in 2025, bringing it down to 7.75% as of August.

The pace of easing has slowed due to persistent core inflation, which remains above target.

Inflation Outlook. Headline inflation is at 3.5%, approaching the 3% target.

Core inflation, however, is sticky at 4.2%, especially in services and housing-related prices.

Policy Guidance

Banxico has signaled that future rate cuts will be smaller and more data-dependent. Caution is driven by concerns over global interest rates, domestic demand, and energy price volatility.

GDP Growth & Domestic Activity

Growth Outlook. The Mexican economy is experiencing stagnation in 2025, with projected growth of just 0.2–0.5%.

High interest rates, weak consumer spending, and falling investment are key constraints.
Fiscal & Structural Policy

Fiscal Policy. The government has maintained moderate fiscal discipline, though rising social and energy subsidies have widened the fiscal deficit slightly in 2025.

External Sector & Trade

Trade Balance. The current account is in modest surplus, supported by stable oil exports, remittances, and slower imports due to weak demand.

Currency Performance. The Mexican peso has appreciated to ~18.5 per USD, supported by positive real rates and tariff extension deals with the U.S.

U.S. Trade Relations. The U.S. granted a 90-day extension on proposed tariffs, reducing short-term risk.

Political Risk & Investment Environment. 2025 Elections, Mexico held general elections in June 2025. The ruling coalition retained majority control, but policy uncertainty remains, especially around energy regulation and judicial independence.

Financial System Stability

Banking Sector. Banxico’s midyear financial stability report highlighted solid capitalization, profitability, and liquidity.

4. MACD (Not visible, inferred)

Based on price behavior and strong trend acceleration:

MACD is likely positive and above signal line.

Bullish momentum is strong and confirmed.

📌 Key Insight: No visible signs of exhaustion — momentum supports continuation.

Support Levels:

54,500 (Red step line) — previously tested multiple times and now established as a reliable base.

57,500–58,000 — near-term zone of support aligned with the moving average.

Resistance Levels:

59,700–60,000 (Blue step line) — most recent high and key upside test.

1. Monetary Policy & Inflation

• Recent Rate Cuts:
  The Bank of Mexico (Banxico) reduced its benchmark interest rate by 0.25 percentage points to 7.75% in August, marking a slower pace of easing following several half‑point cuts. Core inflation remains sticky at 4.23%, though headline inflation dropped to 3.51% in July (Banxico, Wall Street Journal).
• Policy Direction:
  Banxico indicated future cuts will likely be smaller and more gradual, reflecting concerns around persistent core inflation and ongoing economic uncertainties (Wall Street Journal).

2. Economic Growth & Activity

• Forecasts & Performance:
  Mexico’s GDP growth outlook remains subdued. The consensus forecast for 2025 is around 0.2%, with minimal quarterly variation. A modest rebound is projected for 2026 (Federal Reserve Bank of Dallas).
• Recent Output Trends:
  Economic activity shows mixed signals. Industrial production and exports have seen slight gains, and the leading economic index (LEI) rose 0.9% in June, though still negative year‑to‑date, signaling ongoing challenges (The Conference Board).

3. Trade, Global Policy & Domestic Reforms

• The economy is pressured by trade uncertainty, particularly potential U.S. tariffs, alongside domestic reforms like judicial restructuring and fiscal consolidation that have weighed on investment and confidence (BBVA Research).
• The World Bank forecasts modest improvement, with growth at 0.2% in 2025 and a possible rise to 1.1% in 2026 (Mexico News Daily).

4. Fiscal Stimulus & Green Initiatives

• On July 4, 2025, a decree was issued to provide tax incentives for projects within the newly designated Circular Economy Development Poles for Well‑Being (PODECIBI). This initiative aligns with the administration’s emphasis on sustainable economic models under the 2025‑2030 National Development Plan (Holland & Knight).

Currency & Investor Sentiment

However, analysts caution that such gains may be limited going forward due to shifts in global sentiment (Reuters).

The Mexican peso has appreciated sharply—climbing from around 21 to 18.5 per USD amid eased trade tensions and a 90-day extension of U.S. tariffs. Mexico’s higher interest rates (7.75%) have attracted carry‑trade interest (Financial Times).

Trend & Price Action

– Support Levels:
  – 52,000: Strong support level tested recently.
  – 50,000: Long-term base if market weakens further.

– Resistance Levels:
  – 55,000: Resistance from local highs.
  – 57,500: A key level that must break for sustained uptrend.

– Trend Direction:
  – Short-term trend is flat; lower highs forming.
  – Long-term trend still up but momentum weakening.

Moving Averages

– 50-day MA: Slightly down, near price — signals indecision.
– 200-day MA: Flat to mildly rising, suggesting range-bound action.

MACD

– Histogram: Neutral, hovering around zero.
– MACD and signal lines are crossing frequently — no clear direction.

RSI (Relative Strength Index)- RSI around 52–55, indicating neutral conditions.
– No overbought or oversold signals at this time.

1. Central Bank and Monetary Policy
– Banxico is cautious due to lingering inflation concerns.
– Positive real rates continue to support investor confidence.

2. U.S. Economic Linkages
– Strong U.S. demand benefits Mexican exports and manufacturing.
– U.S. economic policy changes are key external variables.

3. Nearshoring Trends
– Increased nearshoring continues to benefit industrial sectors.
– Infrastructure and logistics are long-term growth beneficiaries.

4. Peso Stability
– The peso is stable, helping manage inflation and attracting capital inflows.

5. Political Outlook
– Mid-2025 elections may bring policy changes.
– Energy and labor reforms are potential market movers.

6. Commodities and Energy
– Oil prices influence public finances and PEMEX stability.
– Fiscal health supported by current oil price levels despite structural challenges.