Recovery Challenges

The USD/MXN has bounced back from a low of 18.20 but is having trouble getting past the 50-day moving average (50-DMA). To continue its recovery, it needs to rise above 18.65. If it doesn’t, it could face more downward pressure, according to analysts at Société Générale. Right now, the recent increase follows an interim low near 18.20 from last month. Although the daily MACD shows positive divergence and reduced downward momentum, a rise above the 18.65 pivot is necessary to confirm a lasting rebound. If USD/MXN can’t break through 18.65, it risks declining again. This analysis comes from a team that compiles market insights from experts, including comments from both commercial and other analysts. The USD/MXN pair is at a crucial juncture after bouncing back from the 18.20 level last month. It is now testing resistance at the 50-day moving average, a typical hurdle for currency movements. We are keeping an eye on the 18.65 level as a key indicator of the pair’s next direction. If there is a strong break above 18.65, traders should see this as a bullish sign for the dollar. This could be an opportunity to buy call options and benefit from a possible recovery toward the 19.00 mark. Recent minutes from the U.S. Federal Reserve’s September 2025 meeting indicate a more aggressive stance among members than the market expected. On the other hand, if the pair cannot overcome the 18.65 resistance, it may signal that the recent bounce is losing strength. In this case, buying put options would be a wise move to prepare for a potential drop back to the 18.20 lows. Mexico’s latest inflation report, released on October 8, 2025, showed a slight rise to 4.6%, raising doubts about whether Banxico will continue easing.

Indecision At Key Level

The current situation shows decreasing downward momentum, but key fundamental factors still play a crucial role. Recent data from the U.S. Commerce Department for the third quarter of 2025 revealed that investment in nearshoring to Mexico has slowed for the first time in two years. We remember the sharp, unexpected moves caused by rate differences in early 2024, indicating a potential catalyst could emerge at any time. Given this uncertainty at a vital technical level, implied volatility on USD/MXN options has increased. For those who believe the pair will remain stable for now, selling a short-term strangle could be an effective strategy to collect premium. This method benefits from the absence of a clear breakout in either direction ahead of the next significant economic data releases. Create your live VT Markets account and start trading now.

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