• USD/MXN extends winning streak despite the dovish sentiment surrounding the Fed.
• The upside of the US Dollar could be limited due to declining US Treasury yields.
• The MXN may limit its downside as mid-month inflation data for July could deter Banxico from easing policy.

USD/MXN continues to gain ground for the fifth successive session, trading around 18.50 during the European hours on Monday. The USD/MXN pair gained ground as the US Dollar has recovered its intraday losses. However, the downside in the US Treasury yields may weaken the Greenback, limiting the upside of the pair.

US Dollar Index (DXY), which measures the value of the US Dollar against the six other major currencies, holds minor gains around the level of 104.40 with yields on US Treasury bonds standing at 4.37% and 4.17%, respectively, at the time of writing.

Additionally, signs of cooling inflation and easing labor market conditions in the United States (US) have fueled expectations of three rate cuts this year by the Federal Reserve (Fed), starting in September. This has put pressure on the US Dollar.

On Friday, the US Personal Consumption Expenditures (PCE) Price Index indicated a modest rise in inflation for June and provided further signs of easing price pressures. The US PCE Price Index rose by 2.5% year-over-year in June, down slightly from 2.6% in May, meeting market expectations. The PCE Price Index increased by 0.1% month-over-month after being unchanged in May