The USD/MXN currency pair has seen a dramatic reversal to the downside from its highs of February. What’s replaced those signs of fitfulness recently is a steady appreciation of the Mexican peso over the last several months. This strengthening is largely attributed to market speculation surrounding potential trade agreements and tariffs under U.S. President Donald Trump, which have fueled optimism among investors.
The peso’s recent gains spell good news on the other side of the Pacific. We expect the USD/MXN to break below the psychological barrier of 19.50 in the near future. According to analysts, the key resistance zone for the expected wave four rally lies between 19.77-19.84. This region aligns with Fibonacci projections for wave four. It corresponds with the swing lows we saw back in March and April.
In the past, the USD/MXN pair has experienced significant price swings. The currency saw a significant rebound in 2016-2017. Then a huge reversal occurred with the inauguration of Trump in January 2017. During that time, the USD/MXN dropped from 22 to 17.60 – almost a 20% drop. Recent market dynamics suggest a repeat trajectory moving forward. The recent sharp decline in USD/MXN has not even retraced 38.2% of the breakout rally we witnessed in 2024.
Widespread market analysts estimates expect further declines in USD/MXN, with best-case targets pointed toward the 19.00 region. Projections show that the two may very well be on track to drop to as little as 18.00 by the end of the year if things keep going this way. Another important level to watch is 20.16, as a drop below this line could indicate further bearish pressure.
Many factors play into these trends in the Forex market. We see a decline in U.S. yields and a weakening dollar providing additional support for USD/MXN to fall. As investors digest these news stories, many are looking ahead in anticipation of potential trade negotiations that may have even a more dramatic impact on currency valuations.