USD/MXN climbs on risk aversion spurred by US debt ceiling risks, ahead of the FOMC

• USD/MXN snaps three-day losing streak as sentiment sours over possible US debt default.
• The Federal Reserve is expected to raise rates, while Banxico is estimated to keep rates on hold.
• US job openings for March fall, while US Factory Orders increased.

The Mexican Peso (MXN) erased some of its earlier gains during the North American session, as the USD/MXN pair climbs 0.20%, but it remains shy of conquering the 18.00 figure. US equities closed on a lower note as the US debt ceiling narrative takes center stage amongst the US banking turmoil. The USD/MXN is trading at 17.9792 after hitting a low of 17.8972.

USD/MXN reverses course on US debt default concerns as Banxico could pause rate increases

The USD/MXN snapped three days of losses as sentiment shifted sour. Nervousness around a possible US debt default, as the US Treasury Secretary Janet Yellen commented that the government might run out of money by June 1, kept investors uneasy. The US Federal Reserve  (Fed) is expected to raise rates above the 5% threshold, while the Mexican central bank, known s Banxico, is estimated to keep rates on hold.

Earlier, after Wall Street opened, the US Department of Labor revealed that job openings for March fell to 9.590 million, below estimates of 9.775 million, according to the JOLTs report. At the same time, the US Department of Commerce revealed that Factory Orders increased by 0.09% MoM, exceeding estimates, well above February’s data, which showed a contraction of 1.1%.

The USD/MXN shrugged off the fall of US Treasury bond yields, weakening the US Dollar. Nevertheless, when the market mood shifts sour, high beta currencies, like the Mexican Peso (MXN), weaken against the US Dollar.

The US Dollar Index (DXY), a gauge of the buck’s value against a basket of rivals, slides 0.18%, down at 101.927, bracing to the 20-day EMA.

USD/MXN Technical Analysis

The USD/MXN remains downward biased despite erasing last Monday’s losses. As long as the pair remains below the 20-day Exponential Moving Average (EMA) at 18.0633, further downside is expected. On the other hand, if USD/MXN buyers reclaim the latter, a rally to the 50-day EMA at 18.2539 is on the cards. Once cleared, the USD/MXN could threaten the 100-day EMA at 18.5746.