USD/MXN has dropped after failing to stay above the 50-day moving average, now testing the support level around 17.85 to 17.80. Analysts from Société Générale warn that a drop below these levels could push the pair down to the July 2024 lows of about 17.60. The decline continued when the pair couldn’t break through the 50-DMA at approximately 18.22, leading to the current test of 17.85/17.80. Although there’s a positive divergence on the daily MACD, we haven’t yet seen clear signs of a reversal in the price movements.

Short Term Bounce Resistance

If there’s a short-term bounce, it may hit resistance at the 18.22 moving average. If this level is not broken, the decline could extend further, possibly reaching the July 2024 lows near 17.60. The markets change quickly, and experts share their insights daily through newsletters like the Orange Juice Newsletter from FXStreet. Subscriptions require you to agree to their terms and conditions. This information is for educational purposes and does not suggest buying or selling assets. Readers should do their own research before making any investment choices. The opinions expressed belong to the authors and do not reflect an endorsement by FXStreet. The US dollar is weakening against the Mexican peso after failing to stay above the 50-day moving average at around 18.22. Right now, we are observing the pair test support levels at 17.85 and 17.80. Indicators show the decline may slow, but a significant drop could bring the July 2024 lows of 17.60 back into play.

Peso Strength and Fundamental Factors

For traders expecting more strength in the peso, this suggests positioning for a move towards the 17.60 level in the next few weeks. Buying put options with a strike near 17.75 could take advantage of a break below the current support. This approach offers a defined-risk way to profit from the ongoing downward trend. The peso’s strength is backed by fundamental factors observed throughout 2025. The Bank of Mexico has kept interest rates high at 11.00%, compared to the U.S. Federal Reserve’s 5.50%. This yield difference makes the peso attractive for carry trades, bringing more capital into Mexico. Additionally, data from late 2025 supports this perspective. Remittances from the US reached new heights in November 2025, ensuring a steady flow of dollars into Mexico. Alongside ongoing foreign direct investment from nearshoring trends, this creates consistent demand for the peso. If the dollar does experience a short-term bounce, the 18.22 moving average should be seen as a strong resistance point. Selling call spreads with a ceiling near this level could be an effective strategy to profit if the dollar’s recovery fails. This allows traders to take advantage of the overall downward trend while earning premiums. Even though the trend is downward, we should remain cautious because the positive divergence on the MACD indicator suggests that selling pressure might be easing. Looking back, we’ve seen sharp volatility around the 2024 elections, reminding us that conditions can shift quickly. Therefore, using strategies with defined risk is wise. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now