Rabobank analysts Christian Lawrence and Molly Schwartz report that the USD/MXN currency pair has broken below the 17 level for the first time since May 2024, prompting the bank to revise its forecast for the pair lower in the coming weeks [1]. The analysts attribute the Mexican Peso's strength to robust carry demand and subdued volatility, which are expected to continue supporting the MXN [1].
Following the technical break below 17, Rabobank now targets USD/MXN reaching 16.5 in the near term, with mild support identified at 16.45/49 and stronger support at 16.25 [1]. The analysts note that their proprietary reversal indicator triggered warning signals and observed bullish divergence after the move lower [1]. While they do not expect the pair to break below 16.25, they acknowledge that a spike in volatility could quickly push USD/MXN back to the mid-17s or even above 18 [1].
Rabobank has revised its USD/MXN forecast lower to reflect the confirmed close below critical support at 17 and believes that the outlook for FX volatility has structurally shifted, reducing MXN's sensitivity to volatility [1]. The bank anticipates a mild retracement for USD/MXN next year but expects the pair to remain within recent trading ranges [1].
CONCLUSION
Rabobank's analysis highlights the Mexican Peso's carry-driven strength and the technical significance of USD/MXN breaking below 17. The bank's revised forecast suggests further near-term appreciation for MXN, though volatility spikes could quickly reverse these gains. Overall, the outlook remains supportive for MXN, with expectations of range-bound trading in the medium term.