Mexican Peso Hits New 2025 Highs Against Dollar, Supported by Yield Gap and Bearish Charts

The Mexican peso extended its rally against the US dollar over the last 24 hours, reaching its strongest point of 2025. According to official exchange data and market charts, the USD/MXN rate closed at 18.74 on July 1, 2025, after opening near 18.85 the previous day.

This marks a continuation of the peso’s month-long advance, with the currency strengthening by more than 2% over June. Market participants attribute this move to a combination of technical momentum and macroeconomic fundamentals.

On the technical front, both the 4-hour and daily charts show a clear downtrend for USD/MXN. The price has broken below key support levels, including the 18.80 mark, which had held for several weeks.

The 50-day and 200-day simple moving averages remain above the current price, confirming the bearish trend. The Relative Strength Index (RSI) on the daily chart sits near 31, signaling the pair is approaching oversold territory but not yet triggering a reversal.

The Moving Average Convergence Divergence (MACD) indicator continues to print negative values, with no sign of bullish divergence. Bollinger Bands have widened, reflecting increased volatility as the peso gains ground.

Volumes have remained steady, with no evidence of panic selling or buying. This suggests a controlled, persistent move rather than a speculative blow-off.

Market makers and institutional participants have not reported any unusual ETF inflows or outflows, indicating that the peso’s appreciation is not being driven by a sudden shift in portfolio allocations.

Fundamentally, the peso’s advance is underpinned by a favorable interest rate differential. Despite Banxico’s recent 50 basis point cut to 8.50%, Mexican rates remain well above those in the United States.

Peso Strengthens on Fed Dovishness and Yield Advantage

The Federal Reserve’s dovish signals and the May 16 downgrade of US sovereign debt have further eroded the dollar’s appeal. The peso’s strength persists even as Mexican economic growth remains subdued, with first-quarter GDP up just 0.2% and inflation hovering near 3.9%.

The market continues to favor the peso for carry trade opportunities, given the yield advantage. However, the outlook is not without risks.

The Mexican economy’s heavy reliance on US demand—85% of exports go north—means any significant US slowdown could quickly reverse the peso’s gains.

For now, technical and macroeconomic indicators align to support the peso, but traders remain alert to any signs of a US economic shock that could trigger a swift rebound in USD/MXN.

The last day’s price action reflects a market that is following the fundamentals and technicals closely, with no evidence of manipulation or speculative excess. The peso’s rally stands as a testament to the importance of yield and global risk sentiment in currency markets.