USD/MXN Monthly Forecast: May 2025

• The US dollar has lost a lot of ground against the Mexican peso during the month of April, after initially spiking above the 21 MXN level.
• By doing so, it suggests that perhaps the massive barrier near the 21 MXN level may in fact end up holding from a longer-term standpoint.
• If that ends up being the case, it is a major signal for traders out there that perhaps the Mexican peso will start to strengthen from a longer-term standpoint.

Interest Rate Differential

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While the interest rate differential isn’t as wide as it historically has been, the reality is that rising US interest rates aren’t anywhere near strong enough to keep the interest rate differential close for those who would be worried about carry trades. After all, Mexico has a huge interest rate, and while the US interest rate has been climbing in general, it is still well less than half of what Mexico offers. Because of this, it does make the Mexican peso attractive, but we also have to keep in mind that perhaps we are starting to get a little bit of thawing in the relations between the United States and Mexico, which of course is good for Mexico itself.

It’s also worth noting that the market is trying to find support near the 20 Week EMA, so if and when it does bounce from here, that would be a very bullish sign. On the other hand, if we were to break down below the 50 Week EMA, the next major support level is sitting just above the 19 MXN level, which is also backed up by the 200 Week EMA. In this environment, I think it’s very difficult to see this market as overly bullish, but bearish is a real possibility if the US dollar continues to lose strength against most currencies around the world. After all, Mexico is considered to be a bit more risky than the United States, so if money is running away from the US dollar against most currencies, it means that we are willing to take risks, or we are starting to see more greenback selling overall.

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