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BRL Edges Back Into Positive Territory On The Session

BRAZIL
  • The firmer greenback and negative sentiment across global markets prompted USDBRL to gap higher at the open on Tuesday, printing a high of 4.9410 in the process. Since then, the pair has been edging lower in line with regional currencies but outperforms at the margin. The moderately hawkish Copom minutes and other notable headlines may be bolstering BRL sentiment.
  • Bullish outlooks from both HSBC and Verde Asset Management on the currency have provided additional tailwinds throughout the session, which has seen USDBRL dip back below 4.90, trading close to session lows of 4.8917 at typing. Additional optimism from Fitch regarding rating actions for Brazilian corporate issuers may also be contributing.
  • We noted yesterday that Goldman Sachs noted that if inflation relief proves to be sustained (this week’s US CPI print is the next key signpost) and the market embraces more fully the probability of a soft landing scenario, GS see room for cyclical EM currencies to recoup recent losses. Furthermore, they believe BRL to be relatively more insulated than CLP as both central banks continue to cut rates.
  • USDBRL’s earlier high came close to the next important resistance at 4.9499, the Jul 6 high. Clearance of this level would be seen as an important short-term breakout and open 5.0039, the Jun 2 high. Initial support to watch is at 4.8158, the 20-day EMA. Key support has been defined at 4.6964, the Jul 28 low.
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