Dollar Projections Against the Peso in 2025: An Investor Analysis Guide

The USD/MXN market continues to be one of the most dynamic currency pairs in Latin America. As 2025 approaches, fluctuations between the US dollar and the Mexican peso demand a thorough analysis that considers both economic fundamentals and technical market signals.

Current Dynamics of USD/MXN: Volatility in Context

In recent weeks, the USD/MXN pair has fluctuated around 19.88 pesos per dollar, reflecting the political and economic uncertainty characterizing the moment. Movements have been particularly notable, reaching levels close to 19.94 after touching lows in May 2024, demonstrating the marked volatility of this pair.

In the United States, the possibility of a change in administration has generated defensive movements among investors, who seek refuge in safer assets like the dollar. Proposals for a 200% tariff on imported vehicles from Mexico have exerted additional pressure on the Mexican peso.

Meanwhile, Mexico faces its own institutional challenges. The judicial reform implemented by the government has sparked intense debates about political stability, affecting investor confidence in the solidity of Mexican institutions. This situation, combined with the peso’s weakness, has amplified the gap between both currencies.

Key Data of the USD to MXN Currency Pair

The high liquidity of USD/MXN makes it an accessible instrument for traders of various profiles, while its high volatility offers opportunities for more active traders.

Technical Signals to Guide Decisions

Technical analysis of USD/MXN provides clues about the likely short-term behavior:

Bollinger Bands: Consolidation and Breakouts

With a 20-period moving average, Bollinger Bands show a price that has recently touched the upper band, suggesting a transient bullish momentum. However, a retreat toward the moving average indicates a possible consolidation period. Traders should watch for two scenarios: a sustained breakout above the upper band could continue the upward trend, while a fall below the moving average would signal bearish corrections.

RSI (Relative Strength Index): Market Neutrality

At 53.42, the RSI confirms a neutral position, with no overbought or oversold conditions. This suggests that the price movement could continue sideways in the short term. Traders should monitor that it does not cross above 70 (sobrecompra) or fall below 30 (sobreventa).

RVI (Relative Volatility Index): Slight Bearish Bias

With a value of 34.60, the RVI reflects a slight negative momentum, reinforcing the possibility of corrections if the pair does not hold its current supports.

Economic Fundamentals: What Drives USD/MXN in 2025

Divergent Economic Growth

Growth prospects between both countries are radically different. Mexico faces a moderate scenario, with the IMF projecting a GDP growth of 1.3% for 2025, while BBVA Research estimates 1.0%. This slowdown reflects weak domestic demand and deteriorating formal employment.

In contrast, the United States maintains a more robust outlook. Vanguard projects a 2.1% growth driven by resilient consumption and a dynamic labor market. This growth gap tends to attract capital into US assets, strengthening the dollar.

Monetary Policy: The Decisive Factor

Banxico has started a cycle of rate cuts from 10.50% in September 2024, with expectations of continuing reductions in 2025. Each rate cut typically weakens the peso by making peso-denominated assets less attractive.

The Federal Reserve is also lowering rates but from a higher level. After a 50 basis point cut in September, it is expected to bring rates to a range of 4.25%-4.50% in November and December. Despite this easing, yields in dollars will remain competitive compared to the peso, favoring the dollar’s relative strength.

Inflation: Ongoing Pressure on the Peso

Core inflation in Mexico will remain between 3.7% and 3.9% by the end of 2024, exceeding the 3% target set by Banxico. This persistent inflation weakens the peso outlook, especially if Banxico cannot close the gap with its inflation targets.

Dollar Forecast: Scenarios and Predictions for 2025

Various specialized institutions have developed their own forecasts for USD/MXN during 2025:

The dispersion of these projections reflects inherent uncertainty. While some analysts see USD/MXN approaching 25.83 by year-end, others estimate it will fall below 19.00. This variability advises extreme caution in interpreting any isolated forecast.

Macroeconomic Factors Shaping the Exchange Rate

Interest Rates

Adjustments in Federal Reserve rates attract global capital flows, strengthening the dollar. When Banxico reduces rates, investors find US markets more attractive, weakening the peso.

Trade Balance

Mexico mainly exports to the United States, and these exports strengthen the peso. A weakening US demand would reduce these exports, exerting negative pressure on the Mexican currency.

Political Stability

Institutional uncertainty in Mexico leads to capital outflows, depressing the peso. Relative stability in the US reinforces the perception of the dollar as a safe-haven asset.

Oil and Commodities

As a net crude exporter, Mexico is particularly vulnerable to drops in oil prices. Recent geopolitical conflicts have spiked these prices, but any normalization would significantly weaken the peso.

Historical Background: Lessons from the Past

The USD/MXN relationship has experienced extreme cycles. During the Mexican debt crisis of the 1980s, the exchange rate soared in massive devaluations. The 1990s brought stability thanks to NAFTA and foreign direct investment.

Oil shocks of 2014-2015 and 2016-2018, OPEC decisions, the 2008 global financial crisis, the US elections of 2016 and 2020, and the COVID-19 pandemic have left deep marks on historical quotes. This characteristic volatility warns traders to expect abrupt movements during periods of political or economic change.

Operational Opportunities: When and How to Participate

Available Investment Vehicles

Forex Market: Direct trading of currency pairs through authorized platforms, ideal for active traders with leverage management experience.

Specialized Funds: Asset management institutions offer funds that replicate USD/MXN behavior (like the S&P/BMV), allowing exposure without direct trading.

Derivatives: Futures and options on currencies enable more complex strategies, from hedging to pure speculation.

Contracts for Difference (CFDs): Instruments like those offered on regulated platforms allow speculation on price movements without owning the underlying currency.

Strategic Moments to Trade

The forex market operates continuously, but liquidity varies by session. Federal Reserve announcements, US economic reports, Banxico statements, political events in both nations, and OPEC bulletins represent windows of opportunity with concentrated volatility.

Signal Summary: Where the Market Is Heading

Combining fundamental and technical analysis, the outlook suggests:

For long (buy) operators: A sustained breakout above 20.00 with RSI not overbought would indicate solid bullish momentum. Continued rate cuts by Banxico reinforce this scenario. Mexican political instability and the relative economic strength of the US underpin this bias.

For conservative (sell/reduce) operators: If RSI exceeds 70, overbought conditions justify taking profits. A fall below 19.50 accompanied by a bearish RVI would suggest closing long positions.

Final Considerations: Navigating Uncertainty

The dollar forecast against the Mexican peso in 2025 requires constant monitoring of multiple variables. Short-term investors could benefit from current volatility but must manage risks precisely, remembering that leverage amplifies both gains and losses.

Federal Reserve and Banxico monetary policy decisions will largely determine USD/MXN direction. With Mexican inflation above targets, the peso will likely remain under relative downward pressure, allowing the dollar to show strength in the medium term.

In the long run, the evolution of oil prices and economic prospects of both nations will determine whether the peso recovers or continues weakening. Prudent investors will monitor these macro indicators while contemplating their strategies, adjusting according to how the political and economic context develops in 2025.