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BRAZIL: USDBRL Gaps Lower Ahead Of BCB Spot Auction, Recovering Off Lows

BRAZIL
  • USDBRL gapped down to 5.58 on the open, before paring some of the move, currently 0.35% lower on the day around 5.605 at the time of writing. As a reminder, the BCB is due to hold a spot USD auction between 1330-1335BST(0830-0835ET) today, when it will auction as much as $1.5bn. This will mark the first intervention by the BCB since December 2021.
  • The moves have been moderate so far following the news and a broader rally for the EM FX basket. From a technical perspective, bullish conditions in USDBRL remain intact and the bear cycle over much of August is considered corrective.
  • A reversal higher would refocus attention on 5.6724, the 61.8% retracement of the Aug 5 - 19 correction, which capped USDBRL gains during yesterday’s session. Clearance of this level would expose key resistance and the bull trigger at 5.8551, the Aug 5 high. Key support has been defined at 5.3768, the Aug 19 low.

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