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J.P.Morgan Recommend Tactical USD/BRL Shorts

BRL

Monday saw J.P.Morgan note that "while we were hoping for USD/BRL levels above BRL5.60 to go short, we think enough of the bad news flow is now in the price such that the risk reward has flipped marginally in favor of tactical BRL longs. Several factors have combined to make the risk reward more appealing for USD/BRL shorts: we are more confident that 1) the bulk of the negative news flows is likely behind us regarding the fiscal; 2) the BCB are more willing now (given the news flow) to step in via FX interventions and rates hikes to improve the cost/benefit analysis for the currency; 3) the move higher in US real yields is likely going to slow from here given the pace of the moves and given Fed Chairman Powell's likely dovish testimony to Congress this week. This should relieve some pressure on EM FX more generally. These considerations call for a short term tactical short USD/BRL trade, entry BRL5.49, target BRL5.15, stop BRL5.65."

MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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