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Brazilian Real Extends Intra-Day Losses To 1.85%

BRAZIL
  • Following the release of the new fiscal framework bill and analysts noting an added degree of uncertainty over the government’s ability to boost its revenues, the shine has been taken off the Brazilian Real.
  • USDBRL has risen 1.85% and in the process has breached initial firm resistance, seen at 5.0591, the 20-day exponential moving average. Weaker-than-expected February industrial production and the moderate strengthening of the greenback have provided additional headwinds for the Real.
  • The sharp move higher has the potential to be significant given last week’s price action that confirmed a resumption of the broader bear cycle that started Nov 17 last year. 4.8889 support, 76.4% of the May - Nov 2022 bull phase, has held well.
  • Earlier in the week, we noted a piece from ING stating that BRL is enjoying a short honeymoon, but renewed pressure on the central bank or poor fiscal developments could easily end the rally. For reference, ING favoured USD/BRL returning to the middle of a 5.00-5.50 range.
  • There are no major economic data releases from Brazil for the rest of this week.
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