Colombian Peso Surges as Dollar Index Slides: Technical Breakdown Accelerates Peso Rally

The US dollar closed at 4,068 Colombian pesos on June 18, 2025, as the peso posted its strongest performance in months. This move came alongside a global selloff in the dollar, reflected in the US Dollar Index (DXY) dropping to 98.719, its lowest level in over a year.

The DXY has fallen more than 6% year-on-year and nearly 10% since January, marking its steepest first-half decline since 1986. The dollar’s weakness has become a persistent trend, with little sign of reversal as traders anticipate Federal Reserve rate cuts later this year.

In Colombia, the peso’s surge unfolded against a backdrop of fiscal uncertainty. The government’s decision to raise the 2025 deficit target to 7.1% of GDP and suspend the fiscal rule initially rattled markets.

However, the peso’s resilience suggests that global factors—especially the broad dollar selloff—have outweighed local risks for now. Inflation in Colombia eased to 5.16% year-on-year in May, but remains above target, and the central bank has only cautiously started to lower rates.

Technical analysis of the USD/COP pair shows a decisive bearish trend for the dollar. On the daily chart, the pair trades well below its 50-day (4,123.8) and 200-day (4,198.3) simple moving averages.

The Relative Strength Index (RSI) stands at 35.25, approaching oversold territory but not yet signaling a reversal. The MACD is negative, and the histogram shows persistent downward momentum.

Bollinger Bands have widened, with the price pressing the lower band, indicating sustained selling and increased volatility. The 4-hour chart reinforces the bearish view.

Peso Weakness Deepens Amid Global Dollar Retreat

The pair remains below all major moving averages, with the 200-period SMA at 4,186.6 and resistance levels at 4,105.1 and 4,140.1. The RSI is even lower at 28.26, confirming short-term oversold conditions.

The MACD histogram remains negative, and no bullish divergence has emerged. Volume is subdued, showing a lack of interest from dollar buyers. The peso’s strength aligns with broader emerging market trends, as investors rotate out of the dollar in anticipation of US monetary easing.

No significant ETF flows were reported, and market makers have not indicated a shift in positioning. The story is clear: the peso’s rally is driven by a global dollar retreat, confirmed by technical breakdowns and persistent selling pressure.

Unless US policy surprises or Colombia’s fiscal narrative worsens, the peso could continue to appreciate, with technical indicators offering little immediate support for a dollar rebound.

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