The dollar firms up again: the peso opens above 18.15 and my neutral lasts one session

Good morning!

Yesterday's soft PCE took fuel away from the dollar; today the greenback wakes up on its front foot again and the peso hands back ground.

The greenback takes charge again, a day after PCE

USD/MXN is up 8 centavos from the prior close, from 18.0840 to 18.1683 (+0.47%). The US 10Y at 5.28% and climbing Treasury vol are doing the heavy lifting, even though inflation surprised lower only yesterday.

The fact that the currency shrugs off a dovish print from 24 hours ago says more about dollar momentum than anything else. The 20-day peso–10Y correlation sits at +0.03: this month they move independently, so don't pin the pair's weakness on the long end.

From the sidelines back to a call

Yesterday I stepped aside with the 17.90–18.15 band as my fence and said I'd go directional on a close outside it. Spot opens at 18.1683, above the top of that band; my neutral stance lasted exactly one session, and I'll own that.

I turn pro-dollar. For the record: my 24-Sep pro-dollar view validated, USD/MXN ran +3.57% over five sessions and matured today. I read the firm-dollar pressure right then, and the mechanism hasn't changed.

If it holds above 18.15 through the session, the dollar ran it; if it falls back inside the band, I'm flat on direction.

Bond vol climbs while the VIX naps

MOVE jumps 3.85 points to 110.45, its alarm zone, while the VIX at 16.26 keeps equities calm. That split — stress in rates, quiet in stocks — is what drags Risk On from 58 to 46, firmly defensive: the peso sub-index at 14 and the jump in rate vol do the damage.

The Banxico–Fed spread at 2.62pp still underwrites the peso structurally, but this week the momentum belongs to the dollar and the rate premium takes a back seat.

One honest technical note: the pair is heavily stretched, nearly nine times its typical daily range above its 20-day mean. Stretched does not guarantee a snap-back; fading on level alone has lost historically, so I treat it as color rather than a reason to lean against it.

My line is 18.15: above it the dollar runs, back inside the band I stay quiet.

— See you tomorrow for Friday's view.