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BRAZIL: Swap Rates Rally Further, USDBRL Key Support Remains Exposed

BRAZIL
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  • DI swap rates continue to outperform today, following Tuesday’s sovereign ratings upgrade from Moody’s, with yields in the belly and long-end falling another 10bp or more, taking the move over the last two sessions to ~15bp. Finance Minister Haddad said that he had spoken to President Lula yesterday on the importance of the fiscal framework, who authorised a redesign of a gas voucher benefit to meet that framework.
  • USDBRL has unwound initial losses, meanwhile, to be broadly flat on the day around 5.44. The pullback from recent highs, however, leaves USDBRL below the 50-day EMA, signalling scope for a deeper retracement.
    • Attention is on the next key support at 5.3768, the Aug 19 low. Clearance of this support would strengthen a bearish threat and open 5.2405, the Jun 6 low.
    • For bulls, a stronger recovery would refocus attention on resistance at 5.6917, the Aug 30 high and a bull trigger.
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  • DI swap rates continue to outperform today, following Tuesday’s sovereign ratings upgrade from Moody’s, with yields in the belly and long-end falling another 10bp or more, taking the move over the last two sessions to ~15bp. Finance Minister Haddad said that he had spoken to President Lula yesterday on the importance of the fiscal framework, who authorised a redesign of a gas voucher benefit to meet that framework.
  • USDBRL has unwound initial losses, meanwhile, to be broadly flat on the day around 5.44. The pullback from recent highs, however, leaves USDBRL below the 50-day EMA, signalling scope for a deeper retracement.
    • Attention is on the next key support at 5.3768, the Aug 19 low. Clearance of this support would strengthen a bearish threat and open 5.2405, the Jun 6 low.
    • For bulls, a stronger recovery would refocus attention on resistance at 5.6917, the Aug 30 high and a bull trigger.