CFD Trading Rate US Dollar vs Mexican Peso (USDMXN)

• USD/MXN trades in positive territory around 20.20 in Thursday’s early European session. 
• The pair resumes its downside as the pair is below the 100-day EMA with a bearish RSI indicator. 
• The first downside target to watch is the 20.10-20.00 region; the immediate resistance level emerges at 20.40.

The USD/MXN pair edges higher to near 20.20 during the early European session on Thursday, bolstered by a modest recovery of the US Dollar (USD). However, Mexico’s strong external accounts, including a trade surplus and robust remittances, might boost the Mexican Peso (MXN) and create a headwind for the pair in the near term.   

Technically, EUR/USD resumes its downside journey after crossing below the key 100-day Exponential Moving Average (EMA) on the daily chart. Additionally, the downward momentum is supported by the 14-day Relative Strength Index (RSI), which is located below the midline around 41.40, indicating that the path to the least resistance level is to the downside. 

The initial support level for USD/MXN emerges at the 20.10-20.00 zone, representing the lower limit of the Bollinger Band and the psychological level. A breach of this level could expose 19.25, the low of October 11, 2024. Extended losses could push prices lower toward 18.60, the low of October 16, 2024. 

On the upside, the first upside barrier is seen at 20.40, the high of March 11. Sustained bullish momentum could see a rally to 20.66, the upper boundary of the Bollinger Band. Further north, the next hurdle to watch is the 21.00 psychological level.  

USD/MXN daily chart

• USD/MXN consolidates in a range above the monthly low touched earlier this week.
• The technical setup favors bearish traders and supports prospects for further losses.
• A sustained strength beyond the 100-day SMA is needed to negate the negative bias.

The USD/MXN pair struggles for a firm intraday direction on Wednesday and oscillates in a narrow trading band, around the 20.2790-20.2795 region through the Asian session. Spot prices, meanwhile, remain close to the lowest level since January 24 touched on Monday, and seem vulnerable to slide further amid the underlying bearish sentiment surrounding the US Dollar (USD). 

Investors now seem convinced that a tariff-driven slowdown in the US economic activity and signs of a cooling US labor market might force the Federal Reserve (Fed) to cut interest rates several times this year. This, in turn, has been a key factor behind the recent USD downfall to its lowest level since mid-October set on Tuesday. The USD bears, however, seem reluctant to place fresh bets ahead of the release of the US consumer inflation figures, which, in turn, is seen acting as a tailwind for the USD/MXN pair. 

From a technical perspective, last week's breakdown and acceptance below the 100-day Simple Moving Average (SMA) for the first time since May 2024 favors the USD/MXN bears. Moreover, oscillators on the daily chart have just started gaining negative traction and suggest that the path of least resistance for spot prices remains to the downside. Hence, any intraday move-up might be seen as a selling opportunity and remain capped near the 20.3825-20.3830 region, or the 100-day SMA support breakpoint.

However, some follow-through buying beyond the weekly top, around the 20.4040 area, might prompt some short-covering move and lift the USD/MXN pair to the 20.5040 area en route to the next relevant hurdle near the 20.6060-20.6070 region. The momentum could extend further towards the 20.7035-20.7040 resistance before spot prices eventually aim to challenge the monthly swing high, around the 21.0000 round-figure mark.

On the flip side, weakness below the 20.2540-20.2535 area could find some support near the 20.1810 region, or the monthly low touched on Monday. This is followed by the year-to-date through, around the 20.1345 zone, below which the USD/MXN pair could accelerate the fall towards the 20.0715 intermediate support en route to the December 2024 swing low, around the 20.0215 region.

USD/MXN daily chart

• USD/MXN dips below 50-day SMA at 20.42, trading at 20.27.
• Weak US Retail Sales and softer PPI sub-components fuel Fed easing expectations.
• Mexico’s Retail Sales, Banxico minutes, and Q4 GDP are in focus this week.

The Mexican Peso (MXN) extended its gains versus the US Dollar (USD), clearing key support at the 50-day Simple Moving Average (SMA) of 20.42 as the USD/MXN found acceptance at lower exchange rates. At the time of writing, the exotic pair trades at 20.27, down 0.09%.

Last week’s worse-than-expected United States (US) Retail Sales report drove the USD/MXN pair lower amid the uncertainty about economic growth in the US.

Although US consumer inflation data surged, some sub-components of the Producer Price Index (PPI) used to calculate the Federal Reserve’s (Fed) preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, suggests that prices could aim lower, increasing the chances for Fed’s easing.

After Friday’s data, figures from the Chicago Board of Trade (CBOT) suggest that investors had priced in 43 basis points (bps) of easing.

Despite this, the Philadelphia Fed President Patrick Harker stated that the current state of the economy justifies maintaining a steady rate policy, noting that monetary policy is well-positioned now. He acknowledged that inflation has remained elevated and persistent in recent months, emphasizing that the Fed's policy stance should continue to work towards lowering inflation.

Ahead of this week, Mexico’s economic docket will feature Retail Sales for December, the release of Banco de Mexico (Banxico) latest meeting minutes, and Gross Domestic Product (GDP) figures for Q4 2024.

Daily digest market movers: Mexican Peso climbs despite Banxico’s dovish stance

• Monetary policy divergence between Banxico and the Fed favors further USD/MXN upside, as the Fed would likely hold rates for a longer period, while Banxico is expected to cut rates again by  50 basis points in the next meeting.
• The US Dollar Index (DXY), which tracks the buck's performance against a basket of currencies, is virtually unchanged at 106.77, a headwind for USD/MXN.
• Trade disputes between the US and Mexico remain in the boiler room. Although the countries found common ground previously, USD/MXN traders should know that there is a  30-day pause and that tensions could arise toward the end of February.

USD/MXN technical outlook: Mexican Peso surges as USD/MXN drops below 50-day SMA

USD/MXN trends lower on Monday and close into the 100-day SMA at 20.24, which, if cleared, could open the door for further downside. The Relative Strength Index (RSI) turned bearish, which indicated that the exotic pair could be headed to the 20.00 psychological figure.

In that outcome, if sellers push prices below 20.00, the next support would be the October 18 swing low at 19.64, followed by the 200-day SMA at 19.37.

Conversely, if USD/MXN rises back above the 50-day SMA, the next resistance would be 20.50, followed by the January 17 high of 20.90, the 21.00 figure, and the year-to-date (YTD) high of 21.29.

USD/MXN carved out an interim high near 21.28 earlier this week and re-integrated within its multi-month range; this denotes lack of steady upward momentum, Societe Generale’s FX analysts note.

MACD experiences crisscross moves around its trigger line

“This is also highlighted by the daily MACD, which has turned flattish and has experienced crisscross moves around its trigger line. Short-term price action could remain within a range defined by limits at 20.12/20.00 and 21.00; a break beyond one of these bands is essential to confirm a directional move.”

• USD/MXN recovers to near 20.50 as Mexican Peso gives up some gains that were driven by a delay in tariff imposition on Mexico by US President Trump.
• The safe-haven appeal of the USD diminishes as investors expect Trump’s tariff agenda would be less fearful than anticipated.
• Investors await the US JOLTS Job Openings data, which will demonstrate the current status of labor demand.

The USD/MXN pair bounces back to near $20.50 in Tuesday’s European session after nosediving from Monday’s high of 21.29. The pair gains as the Mexican Peso gives up some gains that were inspired by United States (US) President Donald Trump’s decision to postpone his orders of imposing 25% tariffs on Mexico and Canada.

President Trump delayed his tariffs plans on Mexico after it agrees to support the US to restrict the passage of drugs and undocumented immigrants to their economy. In a way to dodge tariffs, Mexican President Claudia Sheinbaum took the matter seriously and supported Trump’s agenda of tightening immigration controls by sending 10,000 troops on the border. The event also frozen risks of economic damage to the Mexican economy for now.

Meanwhile, investors are expecting that Trump’s tariff agenda is mere a tool to have a dominant position in negotiations with US’s trading partners, which has diminished safe-haven risk premium of the US Dollar (USD). The USD faces a sharp selling pressure in every attempt of revival from Monday, with the US Dollar Index (DXY) trading cautiously around 108.40.

Going forward, the major trigger for the US Dollar will be the US JOLTS Job Openings data for December, which will be published at 15:00. The economic data will show the current status of labor demand. Economists expect that employers posted 8 million fresh jobs, marginally lower than almost 8.10 million in November.

Investors will pay close attention to the job openings data as it will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook.

• USD/MXN appreciates over 2% following Trump's 25% tariffs on Mexican imports, effecting on Tuesday.
• The US also set 25% tariffs on Canadian goods, while Chinese exports would face a 10% tariff.
• The US tariffs reinforce the dovish expectations of Banxico delivering a larger rate cut on Thursday.

USD/MXN hits the week by extending its gains for the third successive session, trading near 21.20 during the Asian hours on Monday. The pair has surged over 2% following US President Donald Trump's decision to impose 25% tariffs on Mexican imports. Set to take effect on Tuesday, the tariffs target concerns such as illegal immigration and fentanyl smuggling. In response, Mexican President Claudia Sheinbaum announced retaliatory tariffs on Saturday, ranging from 5% to 20%.

The US Dollar Index (DXY), which measures the US Dollar’s value against six major currencies, rises for the fifth successive day and trades above 109.50 at the time of writing. ISM Manufacturing PMI for January will be eyed later on Monday.

Meanwhile, US inflation data reinforced the Federal Reserve’s (Fed) hawkish stance on the monetary policy outlook. The Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, rose 0.3% MoM in December, up from 0.1% in November. On an annual basis, PCE inflation accelerated to 2.6% from the previous 2.4%, while core PCE, which excludes food and energy, remained steady at 2.8% YoY for the third straight month.

The US tariffs along with the economic slowdown reinforce the expectations surrounding the Banco de México (Banxico) to deliver a larger rate cut on Thursday. However, the central bank was expected to lower rates by at least 25 basis points (bps), bringing them down from 10% to 9.75%, though analysts at Capital Economics suggest a 50 bps cut remains a possibility.

• USD/MXN appreciates as Trump reiterated plans to impose a flat 25% import tax on all goods from Canada and Mexico.
• The economic slowdown in Mexico reinforces the likelihood of Banxico’s larger rate cuts.
• US Gross Domestic Product Annualized fell to 2.3% in Q4 from the previous 3.1%, missing expectations of 2.6%.

The USD/MXN pair continues its upward momentum for the second consecutive session, trading around 20.70 during Asian hours on Friday. The Mexican Peso (MXN) remains under pressure following renewed tariff threats from US President Donald Trump.

On Thursday night, Trump reiterated plans to impose a flat 25% import tax on all goods entering the US from Canada and Mexico, citing concerns over fentanyl. The first wave of tariffs on both countries is set to take effect on February 1, according to Reuters. Additionally, Trump hinted at the possibility of imposing tariffs on Canadian and Mexican Oil exports.

In a separate statement on X (formerly Twitter), Trump also reaffirmed his threat to levy 100% tariffs on BRICS nations if they attempt to introduce an alternative currency to challenge the US dollar in international trade.

Economic data from Mexico further weighed on the Mexican Peso. INEGI reported that Mexico’s GDP shrank by 0.6% in Q4 2024, a sharp contrast to the 1.1% expansion in the previous quarter and well below market expectations of a 0.2% decline. This marks the first contraction since Q3 2021. On an annual basis, GDP grew by just 0.6%, missing forecasts of 1.2% and reaching its lowest rate since Q1 2021.

The economic slowdown aligns with signals from Banco de México (Banxico) that larger rate cuts could be on the horizon, particularly if US tariff threats materialize. The central bank is expected to lower rates by at least 25 basis points (bps), bringing them down from 10% to 9.75%, though analysts at Capital Economics suggest a 50 bps cut remains a possibility. 

Meanwhile, US economic data showed signs of slowing growth. The Department of Commerce reported that Gross Domestic Product Annualized (Q4) fell to 2.3% from 3.1%, missing expectations of 2.6%. Additionally, Initial Jobless Claims for the week ending January 24 came in at 207K, below forecasts of 220K but an improvement from the previous week’s 223K.

Investors now turn their attention to key US data releases later on Friday, including Personal Consumption Expenditures (PCE), Personal Income and Spending figures, and the Chicago Purchasing Managers' Index (PMI).