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USDBRL Breaching Initial Support, DI Swap Rates Sink

BRAZIL
  • Given the short-term importance of last week’s break of key resistance at 4.9499, the Jul 6 high, developing price action for USDBRL will be monitored closely. The pair closed back below this technical point yesterday and further declines on Wednesday sees the pair now breaching initial support at 4.9074, the 20-day EMA.
  • Even though markets were never pricing in a real risk of the fiscal framework bill failing to pass, the delay was making it harder to project the 2024 fiscal numbers. Therefore, Tuesday’s approval is providing a marginal positive impact and sees the Real outperforming, despite the greenback’s early advance.
  • DI swap rates are also declining, largely in line with the move seen on international markets, however, contracts expiring in Jan’ 31 are seen down as much as 17bps, perhaps underlining the domestic optimism. Indeed, the IBOVESPA index has gained 0.75% since the open.
  • Both mid-August IPCA inflation and current account balance data will be published on Friday.
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