Dollar vs Mexican Peso: Forecast and Keys to Invest in 2025

The USD/MXN pair remains one of the most volatile in the currency markets due to economic differences between the two countries. Although Mexico and the United States are close trading neighbors, their economic dynamics generate significant movements in the exchange rate. At the end of 2024, the currency is trading near 19.94 pesos per dollar, reflecting upward pressures that will continue to influence market behavior in the coming months.

Economic Factors Determining the Value of the Dollar Against the Peso

Several key elements drive the USD/MXN forecast for 2025. Understanding these dynamics is essential for any investor interested in this currency pair.

Unequal Economic Growth

Mexico faces moderate growth prospects. The IMF and BBVA Research project GDP growth of 1.3% and 1.0%, respectively, for 2025, indicating a slowdown due to weak domestic demand and lower formal employment creation. In contrast, the United States maintains a more robust outlook. Vanguard anticipates a 2.1% growth driven by solid consumption and a resilient labor market. This economic expansion gap boosts demand for dollars, pressuring the peso downward.

Interest Rate Policies

Banxico has begun a cycle of rate cuts, starting from 10.50% in September 2024, with more reductions expected in 2025. These cuts typically weaken the peso by reducing the attractiveness of peso-denominated assets. The Federal Reserve is also lowering rates but more gradually. Analysts expect the US central bank to continue adjustments in November and December, bringing rates to a range of 4.25%-4.50%. Despite these cuts, dollar yields will remain competitive compared to pesos, maintaining a strong dollar.

Political and Geopolitical Uncertainty

The US presidential elections in November 2024 introduce volatility. Donald Trump’s lead in polls has raised concerns about protectionist policies, including the threat of 200% tariffs on imported vehicles from Mexico. This has pushed investors toward safer assets like the dollar, weakening the Mexican peso. Simultaneously, in Mexico, debates over judicial reforms have created institutional uncertainty affecting investor confidence.

Dependence on Oil Prices

Mexico heavily relies on oil exports. Drops in oil prices directly pressure the Mexican currency. The US, being a net importer, benefits from low prices, indirectly strengthening the dollar.

Analysis of Historical Prices and Current Trends

Historically, the USD/MXN has shown extreme volatility. During the debt crisis of the 1980s, the exchange rate surged. The North American Free Trade Agreement (TLCAN) in the 90s helped stabilize the relationship by attracting foreign investment. Oil price declines in 2014-2015 and OPEC decisions significantly impacted the pair. More recently, the 2008 financial crisis, US elections in 2016 and 2020, and the COVID-19 pandemic caused large fluctuations.

Currently, the pair trades near 19.88 pesos per dollar, having reached highs close to 20.15 in recent weeks. The 52-week range spans from 16.26 to 20.15, showing considerable amplitude.

Dollar Forecasts for 2025: Multiple Scenarios

Projections for USD/MXN vary considerably among different analysts. This divergence reflects the environment’s uncertainty:

Forecasts vary widely, with some analysts expecting the peso to depreciate up to 25.83 by year-end, while others project stabilization around 18.77. This variability underscores the importance of prudent risk management.

Technical Signals: Key Indicators for Traders

For traders seeking entry and exit timing, technical indicators provide valuable short-term dynamic insights.

Bollinger Bands: Consolidation Range

Bollinger Bands, based on a 20-period moving average, indicate moderate volatility. The price has recently touched the upper band, suggesting bullish momentum, but a pullback toward the moving average points to a possible consolidation phase. In the short term, the pair could oscillate within a narrower range. A sustained breakout above the upper band would confirm continued bullishness, while a cross below the moving average would signal a correction.

RSI: Neutral Market Position

The Relative Strength Index (RSI) stands at 53.42, reflecting a neutral stance without overbought or oversold conditions. This suggests potential for lateral movement in the short term without a clear direction. If RSI exceeds 70, it indicates overbought conditions and suggests an immediate correction. Below 30 would signal oversold levels with buying opportunities.

RVI: Slightly Negative Momentum

The Relative Volatility Index (RVI) is at 34.60, indicating slightly bearish momentum in the short term. This reinforces the possibility of a correction in the coming days if the pair does not hold its current support. However, the indicator is far from extreme levels.

Investment Strategies in USD/MXN

Long-Term Buy Operations

Investors interested in long positions should look for a sustained breakout of the key resistance at 20.00, preferably when RSI does not show overbought conditions. This would indicate solid bullish momentum driven by political uncertainty and US monetary policy. Monitoring Banxico’s decisions is critical: continued rate cuts provide additional buying opportunities on bullish breakouts.

Sell Operations and Exits

If RSI exceeds 70, it’s time to consider reducing long positions or seeking short-term selling opportunities. Drops below support at 19.50, accompanied by a bearish RVI, may signal opportunities to close long positions or enter short trades.

Methods to Invest in the Dollar Against the Mexican Peso

Direct Forex Market

Currency trading allows direct buying and selling of the pair through online trading platforms, accessible 24 hours from Monday to Friday. Liquidity is high, and typical spreads are around 5 pips, though they vary by broker.

Specialized Investment Funds

Funds that replicate the USD/MXN trajectory, such as related stock indices, allow exposure without direct currency trading. This reduces complexity for less experienced investors.

Derivative Instruments

Futures and options contracts offer leveraged exposure to the pair. They require greater experience and sophisticated risk management.

CFD Contracts (CFD)

Authorized platforms enable trading CFDs on USD/MXN without owning the underlying currency. This allows speculation on price movements with leverage, but amplifies both gains and losses.

Key Moments to Trade

The currency market operates continuously, but liquidity and volatility vary by session. Economic events in both countries generate significant opportunities: Federal Reserve announcements, US employment reports, Banxico decisions, political events in both nations, and OPEC statements on oil production create substantial movements that active traders can leverage.

Summary: Comprehensive Perspective of USD/MXN in 2025

The USD/MXN pair is positioned as a volatile and dynamic opportunity for 2025. Fundamental factors — higher economic growth in the US, more aggressive rate cuts in Mexico, political uncertainty in both nations, and Mexico’s dependence on oil — suggest the dollar could maintain relative strength. Technical indicators point to possible short-term consolidation, but underlying pressures favor sustained upward movements.

For short-term investors, the current volatility offers opportunities for quick moves, especially around key economic and political events. However, leverage can amplify losses, so rigorous risk management is essential. In the long term, monitoring monetary policy developments in both central banks, oil price dynamics, and political stability in Mexico will be crucial for making informed decisions about the dollar’s forecast against the Mexican peso.