USD/MXN rises on risk aversion, as US Treasury yields surged

• USD/MXN rebounds from 20-day EMA, trading higher despite Wall Street’s positive sentiment.
• China’s real estate troubles, starting with Evergrande, now impact Country Garde, intensifying global concerns.
• Upcoming US Retail sales and FOMC minutes eyed, while a light Mexican docket leaves traders tuned to USD dynamics.

USD/MXN began the session positively and bounced off the 20-day Exponential Moving Average (EMA) at 17.0040, even though market sentiment improved, as shown by Wall Street turning green. The USD/MXN is trading at 17.0685m, post gains of 0.42%.

Mexican Peso feels the heat as China’s real estate crisis and US economic indicators steer the market

US equities trade mixed during the North American session, while the Mexican Peso (MXN) gets battered on a risk-off impulse that spurred outflows from the emerging market currency towards the US Dollar (USD), as portrayed by the USD/MXN exchange rate. A jump in US Treasury bond yields underpinned the Greenback after the 10-year benchmark note rate touched a multi-year high of 4.20%.

China’s real estate woes, which initially involved Evergrande in 2021, spilled over its largest private developer Country Garde, which failed to pay its bond interest last week. Real estate in China has suffered tumbling sales as tight liquidity conditions triggered a series of defaults.

Aside from this, the US economic docket would reveal Retail sales for July, estimated to show consumers’ resilience, and Fed speakers on Tuesday. By Wednesday, the release of the latest Federal Open Market Committee (FOMC) minutes could shed light on the Federal Reserve’s (Fed) forward path. At the same time, Industrial Production is estimated to print gains.

Across the border, the Mexican docket is light. That would leave traders adrift to US Dollar dynamics and market sentiment. A risk-on is USD/MXN negative, while risk aversion could pave the way for further USD/MXN upside.

USD/MXN Price Analysis: Technical outlook

The USD/MXN daily chart portrays the pair as neutral to downward biased, but buyers stepping in around the day’s low opened the door for a recovery above the psychological 17.0000 figure. Of note, the Relative Strength Index (RSI) turned bullish, suggesting that the USD/MXN could be bottoming at around the 16.60-17.00 range, opening the door for further upside. USD/MXN buyers can gain tracti9on above the May 17 low of 17.4038, followed by the 100-day EMA at 17.4671, after reclaiming the 50-day EMA at 17.1228.