Will the dollar rise in the coming days? USD/MXN outlook for 2025

The USD/MXN pair is one of the most volatile currency pairs in emerging markets, reflecting the complex economic relationship between the United States and Mexico. Despite their geographic proximity and close trade ties, the dollar-to-peso exchange rate dynamics are deeply influenced by macroeconomic, political, and external factors. In the current context, the question of whether the dollar will rise in the coming days is relevant for investors interested in this currency pair.

Current USD/MXN Dynamics: Factors Driving Volatility

The USD/MXN pair has experienced significant movements recently, oscillating around the 19.88 pesos per dollar level. Over the past months, the pair has reached a high of 20.15 and a low of 16.31, demonstrating considerable market volatility.

Political uncertainty in both countries has been a key catalyst for these movements. In the United States, the possible victory of Donald Trump in recent elections has generated market volatility, mainly due to threats of implementing protectionist tariffs, including a potential 200% tariff on vehicles imported from Mexico. This stance has increased demand for safe assets, strengthening the dollar.

In Mexico, the judicial reform promoted by President Claudia Sheinbaum has sparked significant debates following conflicts between the judiciary and the executive branch. This institutional uncertainty has affected investor confidence in the country’s political stability, putting downward pressure on the Mexican peso.

Economic Outlook for 2025: Will the Dollar Remain Strong?

Divergent Economic Growth

Economic projections for 2025 suggest a slowdown in Mexico but greater resilience in the United States. The International Monetary Fund forecasts Mexican GDP growth of 1.3% in 2025, while other institutions like BBVA Research project 1.0%. This deceleration reflects weak domestic demand and moderate formal employment growth.

In contrast, the US is expected to grow more robustly at 2.1% in 2024, driven by resilient consumption and a dynamic labor market. This divergence in growth rates favors the dollar’s relative strength against the peso, encouraging investors to seek exposure in assets denominated in US dollars.

Monetary Policies: The Decisive Factor

Monetary policy will play a crucial role in the evolution of USD/MXN during 2025. Banxico has begun a cycle of interest rate cuts, reaching 10.50% in September 2024. These cuts are expected to continue through 2025, which typically weakens the local currency by reducing the attractiveness of peso-denominated assets for international investors.

The US Federal Reserve has also started its rate reduction cycle, with a 50 basis point cut in September 2024. However, the pace of cuts is expected to be more moderate than Banxico’s, maintaining US dollar asset yields at competitive levels. Fed rates are projected to be between 4.25% and 4.50% by the end of 2025, remaining attractive for international capital flows.

This difference in monetary policy adjustment pace suggests that the dollar could maintain or even strengthen its position against the Mexican peso in the coming months.

Inflation and Its Implications

Core inflation in Mexico remains high, with estimates between 3.7% and 3.9% at the end of 2024, above Banxico’s 3% target. This persistent inflation limits the monetary authority’s room to aggressively cut rates, creating an environment of uncertainty that pressures the peso downward.

In the US, although inflation has shown a downward trend, it remains above the Federal Reserve’s 2% target. However, the US dollar’s status as a global reserve currency, combined with greater political stability, reinforces its demand even in inflationary contexts.

USD/MXN Exchange Rate Forecasts for 2025

Expert projections for the USD/MXN pair in 2025 show significant variability, reflecting inherent market uncertainty:

These projections show different scenarios: while some analysts expect continued dollar strengthening (with the pair reaching 25.83 in December), others anticipate a correction or stabilization near 19.00. The diversity of forecasts underscores the importance of caution when interpreting these projections.

Technical Analysis of USD/MXN

Bollinger Bands

Bollinger Bands, calculated with a 20-period moving average, reveal moderate volatility in the pair. The price has recently touched the upper band, indicating bullish momentum. However, a retracement toward the moving average suggests a possible consolidation phase in the short term, with the pair oscillating within a narrower range.

A sustained breakout above the upper band would confirm a continued bullish trend for the dollar against the peso, while a crossing below the middle band would suggest a bearish correction.

Relative Strength Index (RSI)

The RSI stands at 53.42, indicating a neutral market position. This level suggests the pair could continue sideways movements without a clear trend in the short term. Critical levels to watch are: if RSI exceeds 70, it would indicate overbought conditions that could precede a bearish correction; if it falls below 30, it would signal oversold conditions that might trigger rebounds upward.

Relative Volatility Index (RVI)

The RVI, which measures trend momentum, is at 34.60, reflecting a slight bearish bias. This suggests that short-term momentum is negative, reinforcing the possibility of a correction if the pair does not stay above its current support level around 19.50.

Historical Context: Lessons from the Past

Understanding the history of USD/MXN provides perspective on its current dynamics. During the debt crisis of the 1980s, Mexico experienced a significant peso devaluation. In the 1990s, the implementation of the North American Free Trade Agreement helped stabilize the Mexican currency by attracting foreign investment.

Price fluctuations in oil have been particularly impactful. The price drops in 2014-2015 and OPEC decisions in 2016 and 2018 exerted significant pressure on the peso, given Mexico’s role as a major crude exporter. The 2008 global financial crisis, US presidential elections in 2016 and 2020, and the COVID-19 pandemic also left deep marks on exchange rate volatility.

Key Factors Determining USD/MXN Evolution

Interest Rates

Interest rate policies in both countries are fundamental. Rate hikes by the Federal Reserve attract capital to US assets, strengthening the dollar and weakening the peso. Conversely, rate increases by Banxico can temporarily attract capital, but the current rate-cutting phase in Mexico reinforces the peso’s relative weakness.

Trade Balance

Mexican exports, mainly to the US, strengthen the peso. A contraction in demand for Mexican goods or a growing trade deficit weakens the currency. The automotive sector, as the main exporter, plays a significant role in this dynamic.

Oil Prices

As Mexico is a major crude exporter, falling oil prices significantly weaken the peso by affecting fiscal revenues and dollar supply. Any downward pressure on energy prices reinforces the peso’s weakness against the dollar.

Political and Institutional Stability

International investors penalize currency with depreciation signals of political instability or institutional fragility. Recent conflicts between powers in Mexico have increased this risk premium.

Inflation

High inflation in Mexico reduces the peso’s attractiveness, while the dollar benefits from being a safe haven in global inflationary environments.

Investment Scenarios in USD/MXN

Buy Opportunities (Long Term)

A sustained breakout above the resistance level of 20.00, accompanied by RSI not showing overbought conditions, could indicate strong bullish momentum driven by political and monetary factors. Investors should especially monitor Banxico’s monetary policy announcements; if aggressive rate cuts continue, this could create buying opportunities on bullish breakouts of the dollar.

Sell Opportunities (Corrections)

When RSI exceeds 70, indicating overbought conditions, investors should consider reducing long positions or seeking selling opportunities. Additionally, if the price falls below the critical support of 19.50, confirmed by a bearish RVI, this would signal opportunities to close long positions or implement defensive strategies.

Available Instruments for Investing in USD/MXN

Forex Market (Forex)

The Forex market allows buying and selling currency pairs through authorized trading platforms, providing direct access to USD/MXN volatility with high liquidity available 24/5.

Currency Funds

Specialized currency investment funds enable participation in the market without operating individual currencies. Examples include indices like the S&P/BMV that replicate USD/MXN performance.

Derivative Instruments

Futures and options contracts offer alternatives to speculate on price movements in USD/MXN, allowing greater flexibility in hedging strategies.

CFD Contracts (CFD)

CFDs allow investors to speculate on exchange rate changes without owning the underlying asset, accessing the pair’s volatility with higher leverage.

Investment Opportunities Based on the Economic Calendar

The currency market experiences significant variations in liquidity and volatility around key economic events. Relevant dates include Federal Reserve monetary policy announcements, US employment reports, political events in both countries, and OPEC statements regarding oil production. These events generate movements that can present opportunities for attentive investors following economic calendars.

Conclusions: Will the Dollar Rise in the Next Days?

The current USD/MXN outlook suggests continued upward pressure on the dollar in the short and medium term. The combination of factors — political uncertainty in both countries, divergence in monetary policies, growth differences, and inflation persistence in Mexico — creates a favorable environment for dollar strength.

US elections and their trade policy implications remain uncertain factors. The geopolitical conflict in the Middle East, which has pressured oil prices, adds complexity to the outlook.

For short-term investors, this volatility offers significant opportunities, though rigorous risk management is required due to inherent leverage in currency markets. Derivative instruments can amplify both gains and losses.

In the medium term, Banxico’s decision regarding the magnitude and pace of rate cuts will be decisive. If it continues aggressive rate reductions, pressure on the peso could intensify, keeping the dollar strong. Defensive investors should closely monitor these developments.

Long-term, the sustainability of dollar strengthening will depend on the evolution of structural factors: relative economic prospects, oil price trends, and political and institutional stability in Mexico. An improvement in Mexico’s political and economic environment could justify long peso positions, while increased global uncertainty would continue to favor defensive strategies and dollar exposure.

Constant monitoring of the technical indicators mentioned — especially resistance and support levels, as well as RSI readings — will be essential for making informed investment decisions in this volatile currency pair.