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BRL Buoyed By Fiscal Framework Optimism, Risk Rebound

BRAZIL
  • Firmer risk sentiment is benefitting the Brazilian Real to start the week as equity markets recover the early Monday sell-off. Additionally, the optimistic tone of ministers regarding the latest discussions with the President over the fiscal framework are acting as an additional BRL tailwind.
    • Latest headline: *BRAZIL GOVT TO REACH AGREEMENT ON NEW FISCAL FRAMEWORK: ALCKMIN
  • Despite the move lower for USDBRL, short-term conditions remain bullish. Last Wednesday’s price activity resulted in a test above resistance at 5.3073, the Feb 10 high and a key hurdle for bulls. The breach opened the potential for a move to 5.3518 next, the 76.4% retracement of the Jan 4 - Feb 2 bear leg, ahead of the 5.4000 handle.
  • On the downside, key support to watch lies at 5.1012, the Mar 8 low. A break of this level would instead signal scope for a return to 4.9410, the Feb 2 low. Initial support lies at 5.2038 the 50-day EMA.
  • As well as the BCB decision on Wednesday, mid-month IPCA inflation data will be released on Friday.

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