USD/MXN Reclaims 200-DMA at 17.40 as SocGen Sees Upside

Key Moments

Technical Picture for USD/MXN

Societe Generale analysts, including Kenneth Broux, report that USD/MXN has broken out above a multi-month descending trend line and has also risen back over its 200-day moving average. According to their assessment, this marks the first time since April 2025 that the pair has traded above that key moving average, signaling a potential shift in momentum.

The analysts point to the 17.40/17.35 region, which aligns with the 200-day moving average, as an important support zone. They indicate that sustained trading above this band could pave the way for a more extended advance in USD/MXN, with upside barriers seen around the June high near 17.68 and additional projections close to 17.80.

Peso Dynamics and Policy Outlook

The analysts note that the recent price action reflects renewed pressure on the Mexican peso as previous carry advantages have diminished. They emphasize that the move in USD/MXN above the 200-day moving average, with the pair trading around 17.50, points to a potential unwinding of long MXN speculative positions.

On the policy front, Societe Generale expects Banco de México (Banxico) to keep its benchmark rate unchanged at 6.50% and to reiterate a data-dependent stance. In their view, policymakers are weighing an improving core inflation profile and moderating domestic growth against external headwinds, including higher US interest rates and persistent global uncertainty.

Banxico-Fed Divergence and Positioning

The analysts state that their central scenario is for Banxico to diverge from the Federal Reserve by remaining on hold not only at the current decision but throughout the rest of 2026. Under this assumption, they anticipate that the policy rate differential between Banxico and the Fed, cited as being around 250bp, will continue to compress over time.

They also highlight that speculative traders have maintained long MXN exposures for an extended period, with net long positions representing 27.5% of open interest just before recent Federal Reserve and Bank of Japan meetings. In their assessment, the sharp acceleration in USD/MXN, particularly the break above the 200-day moving average to 17.50, is “suggestive of potential capitulation of peso longs.”

Original Analyst Commentary (Verbatim)

“USD/MXN recently broke above a multi-month descending trend line and has now reclaimed the 200-DMA. The pair has moved above this average for the first time since April 2025, suggesting that upward momentum may be returning.”

“A broader uptrend could gradually develop if it maintains above the 200-DMA (17.40/17.35). The next potential hurdles are located at the June peak near 17.68 and projections around 17.80.”

“In LatAm, we expect Banxico to leave the policy rate unchanged at 6.50% today. Policymakers are likely to retain a data-dependent message, balancing a gradually improving core inflation backdrop and softer growth momentum against a more challenging external environment marked by higher US rates and lingering global uncertainty.”

“Our base case remains that Banxico decouples from the Fed and stays on hold not only today but through the remainder of 2026, allowing the Banxico-Fed policy rate spread, currently around 250bp, to narrow further over time.”

“Speculative investors have remained long MXN for a while now with net long 27.5% of open interest just prior to the Fed/BoJ meetings – that said a sharp surge in USD/MXN break over 200dma to 17.50 is suggestive of potential capitulation of peso longs.”