Why the Mexican Peso’s Strength Could Continue Against the Dollar

In recent months, the USDMXN pair has shown a clearly bearish trend, suggesting that the Mexican peso could continue gaining ground against the U.S. dollar. While financial markets are inherently volatile, there are several arguments supporting the possibility that this trend may persist, from technical, macroeconomic, and geopolitical perspectives.

USDMXN chart, December 22, 2025. Source: TenTrade.com

These arguments are as follows:

1. Downward technical trend of USDMXN

Technical analysis shows a clear direction:

The USDMXN chart structure displays lower highs and lower lows, a hallmark of a bearish trend.

Every USD rebound has been used by sellers as an opportunity to re-enter short positions, confirming a predominant bias in favor of the peso.

As long as key resistance levels remain unbroken and the structure doesn’t change, the bearish bias in USDMXN remains one of the strongest arguments for the continuation of MXN strength.

2. Bearish signals in the Dollar Index (DXY)

The DXY, the global benchmark for measuring the U.S. dollar’s strength against other currencies, shows:

Bearish divergences in multiple technical indicators.

Persistent selling pressure.

A lack of momentum to sustain new highs.

Structural weakness in the dollar in international markets often translates into depreciation against emerging-market currencies with relatively solid fundamentals, such as the Mexican peso.

3. Monetary policy favorable for the peso

Central banks play a crucial role in currency valuation:

The Bank of Mexico has historically maintained higher interest rates than the Federal Reserve.

This rate differential attracts foreign capital seeking yield, especially in fixed-income instruments.

This creates a favorable environment for carry trade strategies, making the MXN an attractive currency for investors and potentially prolonging its appreciation.

4. U.S. economic dynamism benefits Mexico

Although it may seem counterintuitive, strong U.S. economic performance can actually support the peso. Why?

Mexico is one of the U.S.’s main trading partners.

When the U.S. economy expands, demand for Mexican goods and services increases.

This boosts exports and increases the inflow of dollars into Mexico.

Such trade flows strengthen Mexico’s external balance and contribute to MXN appreciation.

Conclusion

The strengthening of the Mexican peso is not a recent or isolated phenomenon but part of a trend supported by both technical and fundamental factors.

The combination of the following elements could continue driving MXN appreciation against the USD.

The persistent bearish trend in USDMXN.

Weakness in the DXY.

Favorable interest rate differentials.

Trade links with a dynamic U.S. economy.