How the USD forecast for 2025 could reshape your strategy in USD/MXN

What to Expect from the USD-MXN Exchange Rate in 2025? The USD/MXN pair is one of the most volatile in the currency market, and understanding its trajectory is key for any trader attentive to opportunities. Currently, it trades near 19.94 pesos per dollar, but projections suggest significant movements in the coming months.

Fundamental Drivers Moving the USD/MXN

Divergence in Economic Growth

Here’s the crucial point: while the United States projects a GDP growth of 2.1% for 2025, Mexico will barely achieve between 1.0% and 1.3%, according to IMF and BBVA Research estimates. This gap is not trivial. A stronger dollar tends to attract capital toward more dynamic economies, putting pressure on the Mexican peso.

The relative weakness of domestic demand in Mexico and slow-growing formal employment create the perfect scenario for investors to seek refuge in dollar-denominated assets.

Monetary Policy: The Decisive Factor

Banxico has begun cutting rates since September 2024, when they were set at 10.50%. It is expected that they will continue to decrease throughout 2025. The U.S. Federal Reserve follows a similar path, but here’s the important part: dollar yields will remain competitive even with lower rates, maintaining the attractiveness of the US currency.

Less profitability in pesos means less investment in Mexico. The dollar forecast points toward sustained strengthening against the peso if this trend continues.

Political Uncertainty and Its Effects

The U.S. presidential elections in November 2024 are already causing turbulence. Threats of tariffs on Mexican products, especially vehicles, have weakened confidence in the peso. In Mexico, judicial reform and institutional debates add layers of uncertainty that discourage investment.

What Projections Say for the Next 12 Months

Consulting multiple analysis sources, these are the estimates for the exchange rate at key moments in 2025:

For January, forecasts range between 19.23 and 21.50 pesos per dollar. Some analysts like Longforecast project more aggressive movements toward 23.00 in June, while others like Wallet Investor expect downward corrections to 18.77 by year-end.

This divergence reflects the inherent uncertainty of USD/MXN. What seems to have consensus is that volatility will not disappear.

Technical Perspective: Mixed but Revealing Signals

Looking at real-time indicators, the pair fluctuates around 19.88, with a 52-week high of 20.08 and a low of 16.31. The range of a single session (October 22, 2024) was 19.90-19.99, illustrating intraday volatility.

Bollinger Bands indicate consolidation with potential upside. The price recently touched the upper band but retraces toward the 20-period moving average. A clear breakout above 20.00 could trigger a sustained bullish move. Falling below the middle band would signal a correction.

The RSI at 53.42 is neutral, with no overbought or oversold conditions. This suggests sideways movement in the short term, but traders should watch for readings above 70 (potential correction signal) or below 30 (buying opportunities).

The RVI at 34.60 shows a slight bearish bias, meaning very short-term momentum could favor corrections if the pair does not hold its current support level at 19.50.

Historical Context: Repeating Patterns

USD/MXN has experienced extreme volatility at critical moments. The debt crisis of the 1980s led to massive peso depreciations. NAFTA in the 90s stabilized the relationship, but external shocks like oil price drops in 2014-2015 reopened the gap.

COVID-19 pandemic, the 2016 and 2020 U.S. elections, and recent geopolitical conflicts have shown that the pair reacts violently to unpredictable events. 2025 will likely be no different.

Structural Factors Supporting Dollar Strength

Mexico’s Oil Dependence: As a net crude exporter, Mexico is vulnerable to drops in oil prices, which automatically weaken the peso.

Political Stability: The perception of institutional risk in Mexico favors moves toward the dollar as a safe asset.

Persistent Inflation: If Mexican inflation remains above Banxico’s 3% target (estimated between 3.7-3.9%), the peso will stay under pressure.

Interest Rate Differential: Although both central banks are reducing rates, the dollar’s relative advantage persists thanks to its status as a global reserve currency.

Practical Strategies for Traders in 2025

For Long Positions (buying):

• Entry recommended if the price clearly breaks 20.00 with RSI not in overbought territory
• Intermediate target: 20.50-21.00
• Stop loss: 19.50
• Trigger: confirmation of restrictive monetary policy in the U.S. or weakness in Mexican data

For Sellers or Risk Managers:

• If RSI hits 70, reduce long positions
• If price falls below 19.50 with negative RVI, consider tactical selling
• Monitor Federal Reserve and Banxico announcements as volatility events

Available Investment Tools

You can trade USD/MXN through multiple vehicles: direct Forex market, specialized investment funds (like the S&P/BMV that replicates the pair), derivatives such as futures or options, or CFD contracts (on authorized platforms offering leverage without needing to hold the physical currency.

Final Reflection: Opportunity with Caution

The dollar forecast for 2025 suggests a favorable environment for USD/MXN strengthening, driven by economic divergences, monetary policy, and geopolitical factors. However, this is not a linear guarantee. Inflation, oil prices, and political surprises can quickly alter the landscape.

For short-term investors, current volatility offers opportunities but requires rigorous risk management. Leverage amplifies both gains and losses. For medium-term traders, staying alert to Banxico and Federal Reserve decisions is essential. Long-term, institutional stability in Mexico and oil price trends will determine whether the dollar maintains its strength or if the peso manages to recover ground.

The key is not to confuse volatility with direction, but also not to ignore that the forecast points toward sustained pressure on the Mexican peso while uncertainty persists.