- Mexican peso turns negative amid risk aversion.
- USD/MXN bounces back and looks for a test of 20.45 and then 20.50.
- Key events ahead: US inflation on Wednesday and Banxico on Thursday.
The USD/MXN turned positive on Tuesday over the past few hours as US stocks failed to hold onto positive ground. The risk-off environment weighs on emerging market currencies, including the Mexican peso. Banxico is likely to announce a 50bp rate hike on Thursday.
From a technical perspective, the short-term bias is to the upside, particularly above 20.25. The next resistance is located at 20.45. A daily close above 20.50 should clear the day with more short-term gains. The next strong barrier is seen at 20.70.
A drop below 20.25 would ease the upside momentum. The 20-day moving average then emerges at 20.17, and a close below should expose the May low at 19.99.
Risks still appear to be skewed to the upside in the short term, but USD/MXN needs to break above 20.50 to open the door for further strength, while gains below appear limited.
Technical levels
Source: Fx Street
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