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BRL Surges On Lula Comments, MXN Underperforms

  • BRL continues to surge as ex-President Lula said he would like to have former Sao Paulo Governor Geraldo Alckmin as his running mate.
    • “We have divergences, and different visions of the world but I will not have any problem in making a ticket with Alckmin to win the elections and govern this country,” Lula told local websites on Wednesday, adding that he wishes to forge alliances to win the October vote. (BBG)
  • The price action has been exacerbated by a deterioration in technical conditions, evident by USDBRL breaking previous lows as well as the 100-day moving average.
  • Additional tailwinds for the Real may be explained by the divergence against the Mexican peso and a break of resistance in BRLMXN above 3.70 (shown below).
  • Relative MXN underperformance can largely be attributed to technical factors as USDMXN remains well supported at the 200-day moving average around 20.28, following the significant Peso recovery/rally throughout December and January.
    • USDMXN up 0.29% at 20.4713
    • USDBRL down 1.83% at 5.4661
    • BRLMXN up 2.21% at 3.745

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