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(U1)‌‌ Consolidation Mode

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  • While a rising number of EM currencies have entered a period of consolidation in June amid global USD strength, the BRL remains strong against the greenback and is currently testing its psychological support level at 5, which also represents the 50% retracement of the 2020/2021 low high range.
  • A break below that level would open the door for a move down to 4.82 (July 2020 low).
  • On the other hand, equities have been retracing lower, following the global trend as risk off sentiment has been rising in recent weeks.
  • Main risk for EM equities: contraction in Chinese liquidity, strengthening USD and rising uncertainty over the global reopening.

Source: Bloomberg/MNI