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BRAZIL: USDBRL Bull Cycle Still In Play As Fiscal Bill Watered Down

BRAZIL
BulletEM BulletEmerging Market News
  • Local assets remain under pressure on Monday, following the approval of a watered-down version of the government’s spending cut bill by the Senate on Friday, which has reduced expectations of fiscal savings over the next two years. USDBRL has risen another 1% in early trade today, while DI swap rates have climbed further, with yields in the 18-month segment approaching 15.40% again.
    • Earlier, the BCB’s Focus survey saw analysts raise their interest rate forecasts again, with the Selic rate seen reaching 15% by June 2025, before rate cuts begin later in the year.
    • For USDBRL, CIBC believes that if the market continues to question whether Brazil is going to meet its fiscal targets, the BCB will manage to smooth volatility but not get rid of the upward pressure in the pair.
    • Our technical analyst notes that a bull cycle in USDBRL remains in play, with sights on 6.3406, the 3.00 projection of the Aug 19 - 30 - Sep 19 price swing, and 6.4149, the 3.236 projection. A clear break of firm support at the 50-day EMA, at 5.8920, is required to signal a short-term reversal.
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  • Local assets remain under pressure on Monday, following the approval of a watered-down version of the government’s spending cut bill by the Senate on Friday, which has reduced expectations of fiscal savings over the next two years. USDBRL has risen another 1% in early trade today, while DI swap rates have climbed further, with yields in the 18-month segment approaching 15.40% again.
    • Earlier, the BCB’s Focus survey saw analysts raise their interest rate forecasts again, with the Selic rate seen reaching 15% by June 2025, before rate cuts begin later in the year.
    • For USDBRL, CIBC believes that if the market continues to question whether Brazil is going to meet its fiscal targets, the BCB will manage to smooth volatility but not get rid of the upward pressure in the pair.
    • Our technical analyst notes that a bull cycle in USDBRL remains in play, with sights on 6.3406, the 3.00 projection of the Aug 19 - 30 - Sep 19 price swing, and 6.4149, the 3.236 projection. A clear break of firm support at the 50-day EMA, at 5.8920, is required to signal a short-term reversal.