Mexican Peso plummets as the USD/MXN tests key resistance level, which could shift the pair bullish.

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• Mexican Peso plummets as the USD/MXN tests key resistance level, which could shift the pair bullish.
• Risk appetite is mixed, though elevated US Treasury yields underpin the US Dollar.
• Upcoming economic data from Mexico, including the Economic Activity report and mid-month inflation figures, are closely watched by traders

The Mexican Peso (MXN) plunges sharply against the US Dollar (USD) on Tuesday on risk aversion in the FX space. This benefits safe-haven currencies to the detriment of the emerging market currency. That, along with a jump in Treasury yields in the United States, underpins the USD/MXN, which trades at 17.34, up by almost 1%.

Wall Street is trading mixed, weighed down by the sudden rise in US Treasury bond yields. The increase in yields is led by the belly and the long end of the yield curve, rising between four and seven basis points. The US Dollar Index (DXY), which tracks the buck’s performance against a basket of six other currencies, gains 0.37%, up at 103.74. The Greenback has been bolstered by traders pushing back their expectations of Federal Reserve (Fed) rate cutting from March until May, according to the CME FedWatch Tool data.

Across the border, Mexico’s economic docket will feature the release of the Economic Activity report, along with January’s mid-month inflation data.

The USD/MXN daily chart depicts buyers gathering momentum as they dragged the exchange rate to the brisk of breaching the 200-day Simple Moving Average (SMA) at 17.36. Once cleared, this could open the door to test the 100-day SMA at 17.42. Further upside is seen at the psychological 17.50 barrier, ahead of aiming toward the May 23 high at 17.99.

Failure to decisively break the 200-day SMA could open the door for a leg up, with first support at the 50-day SMA at 17.14, followed by the 17.05 swing low reached on January 22, ahead of the 17.00 figure.

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