As we write, the USD/MXN exchange rate has risen to 20.28. Thus, this represents a powerful breakout that began on Wednesday and extended through Thursday. The central bank’s exchange rate has now skyrocketed to a record high of 20.36. This increase is not the result of the implementation of the patchwork market created by recent tariff implementation and economic policy decision making. Today’s daily depreciation of the Mexican Peso against the US Dollar for the second day in a row shows how deep the market is in instability.
The ongoing exchange rate trend is existentially important. Projections indicate it will max out at 20.98 in 2025, a small decrease from 21.00 in their previous projection. Sellers have to take back the power from the market. First, they need to force the favored exchange rate close to the 20.00 level by forcing USD/MXN below 20.20.
Testing Resistance Levels
The USD/MXN is on the cusp of testing some notable resistance points. It’s at the intersection of the 50-day and 100-day Simple Moving Averages (SMA), just above the 20.35/36 area. This resistance point is very important in shaping the future direction of the exchange rate.
Our current economic environment, with tariffs at the helm, has caused a major hit to the Mexican Peso resulting in continuous depreciation. This impact is inextricably tied to Mexico’s economic fortunes, which are tightly correlated to the USD/MXN exchange rate (see Figure 4). As the market moves forward through this stormy climate, the resistance levels currently being tested will be instrumental in determining what direction we trend toward going forward.
Market analysts believe that the USD/MXN will be able to break through these unseen resistance builds. If it does, it could set the stage for additional exchange rate appreciation gains. If these levels remain defended, it would be a sign of reversal or at least stabilization in the short term.
Influential Economic Factors
There are three key economic undercurrents set to determine what happens next with the USD/MXN exchange rate. Banxico’s policy decision will be critical. New changes in US trade policy might shock the markets even more.
Further, the outcomes strongly depend on the Federal Reserve’s policy decisions. The Fed’s decision to raise rates again hangs in the balance. At the same time, the market is pretty sensitive to any shifts in interest rates or signals about monetary policy. The disinflation progress has been interesting and is an important economic storyline. Market experts are already expecting the first 50-basis-point (bps) rate cut as a consequence of this unfolding development.
In terms of investor sentiment, forward guidance from the relevant central banks will be instrumental in shaping market expectations and influencing the market narrative. As these institutions respond to their own challenging and uncertain economic contexts, inevitably their interventions will have a profound influence on the USD/MXN exchange rate.
Future Projections
According to market projections, USD/MXN is expected to hit 20.98 by 2025. Still, this is a forecast that will need to be regularly updated as economic conditions continue to change. This minor downward adjustment from a prior 21.00 estimate underlines the uncertainty and the volatility that is today’s hallmark for global markets.
Sellers would prefer to see the exchange rate move below 20.00. In order to do that, the USD/MXN needs to drop under 20.20. This level marks an important psychological barrier that may unlock new upside trading potential.