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Local Assets Underperform Following US CPI Data

  • The Brazilian real is showing significant underperformance on Tuesday, having reversed its initial gains following the US CPI release with domestic equities also falling to session lows. The slump for local asset prices follows President-elect Luiz Inacio Lula da Silva confirming that leftist Aloizio Mercadante will head the nation’s state development lender BNDES.
  • USDBRL remains below its recent highs having recently breached resistance at 5.4286, the Sep 29 high and pierced 5.5142, the Jul 21 high and a medium-term bull trigger in November.
  • A clear break of the latter is still required to cancel a bearish theme and instead signal scope for a stronger move higher near-term. Short-term gains are considered technically corrective - for now.

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