The Mexican Peso has come under renewed downward pressure as the USD/MXN currency pair broke above a multi-month descending trend line and reclaimed its 200-day moving average (DMA) for the first time since April 2025, according to Societe Generale analysts including Kenneth Broux [1]. This technical development is seen as a signal that upward momentum for USD/MXN may be returning, with the potential for a broader uptrend if the pair holds above the 200-DMA, specifically in the 17.40/17.35 range [1]. The next resistance levels are identified at the June peak near 17.68 and projections around 17.80 [1].
Societe Generale notes that the peso is under pressure as the appeal of carry trades fades, with speculative investors having maintained long MXN positions—net long at 27.5% of open interest just prior to recent Fed and Bank of Japan meetings. However, the sharp surge in USD/MXN above the 200-DMA to 17.50 suggests potential capitulation of these peso long positions [1].
On the monetary policy front, Societe Generale expects Banxico (the Bank of Mexico) to leave its policy rate unchanged at 6.50% at the upcoming meeting, maintaining a data-dependent stance. Policymakers are balancing a gradually improving core inflation backdrop and softer growth momentum against a more challenging external environment, including higher US rates and ongoing global uncertainty [1]. The analysts' base case is that Banxico will decouple from the US Federal Reserve and keep rates on hold not only at this meeting but through the remainder of 2026, which would allow the Banxico-Fed policy rate spread—currently around 250 basis points—to narrow further over time [1].
CONCLUSION
The break above the 200-day moving average in USD/MXN signals renewed downward momentum for the Mexican Peso, with technical and speculative factors both contributing to the move. Societe Generale expects Banxico to maintain its current policy rate, potentially narrowing the rate differential with the Fed. Market participants should monitor key resistance levels and policy signals for further direction.