USD/MXN has started to drop after failing to rise above its 50-day moving average. This signals a return to bearish momentum, especially as it breaks below a key support level. Now, targets are set between 17.85 and 17.60, with any rebounds likely facing resistance around 18.37. The currency pair has continued to fall after a failed attempt to stabilize above the 50-DMA near 18.37. Breaking below this level indicates that the downward trend is likely to continue.

Upcoming Targets

The next targets are to move toward 17.85/17.80, followed by the July 2024 lows near 17.60. If a short-term bounce happens, there may be resistance at the 50-DMA around 18.37. Since the USD/MXN pair could not reclaim its 50-day moving average, we see a clear indication of renewed downward momentum. The pair’s drop below recent support suggests that the path forward is likely downward. This indicates that the Mexican peso may continue to strengthen against the US dollar in the short term. Given this bearish perspective, buying put options on USD/MXN with strike prices close to 17.80 could effectively position for the expected drop. Traders should consider expirations in January or February 2026 to allow time for the move towards the next target. This strategy provides clear risk while taking advantage of potential downside. This technical weakness aligns with fundamental factors as Mexico’s central bank, Banxico, maintained its key interest rate at a high of 11.00% last week. This contrasts with the U.S. Federal Reserve’s more neutral position, making pesos more appealing for carry trade strategies. The interest rate difference remains a strong driver for peso strength.

Trade Strategies

Another strategy is to sell bear call spreads, positioning a short strike just above the key resistance level of 18.37. This approach benefits if the USD/MXN stays below this level, moves sideways, or falls as anticipated. It’s a solid trade for those who think any rallies will be brief and will not surpass this technical barrier. Recent economic data further supports this outlook. Mexico’s Q3 2025 GDP growth was a robust 2.8% annualized rate, exceeding expectations. Meanwhile, the latest U.S. jobs report from November 2025 showed a cooling labor market, somewhat weakening the case for a stronger dollar. These differing economic conditions support a lower USD/MXN exchange rate. We are witnessing a trend similar to the “super peso” strength seen in 2023 and early 2024. This was driven by high interest rates and nearshoring investment flows. Current market behavior indicates that these key themes are re-emerging. Therefore, positioning for further peso appreciation appears to be a logical response to the signals at hand. Create your live VT Markets account and start trading now.

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