• Mexican peso turns negative amid risk aversion.
• USD/MXN rebound 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 during the last hours as US stocks failed to hold into positive ground. The risk aversion environment weighs on Emerging market currencies, including the Mexican peso. Banxico will likely announce a 50bps rate hike on Thursday.

From a technical perspective, short-term bias points to the upside, particularly while above 20.25. The next resistance stands at 20.45. A daily close above 20.50 should clear the day to more gains in the short-term. The next strong barrier is seen at 20.70.

A slide under 20.25 would alleviate the bullish momentum. Then emerges the 20-day moving average at 20.17, and a close below should expose the May low at 19.99.

Risks still appear to be tilted to the upside in the short-term but USD/MXN needs to break above 20.50 to open the doors to more strength, while below gains seem limited.

USD/MXN daily chart