Brazilian Real: Downside risk against US Dollar – Societe Generale

Societe Generale analysts reports USD/BRL has been rebounding from an interim low near 4.88 and is approaching the 200-DMA and a descending trend line around 5.25. They stress the need to see if a base and trend reversal can form, with resistance at 5.32/5.34 and downside risk if 4.99 fails.

Rebound tests major technical barriers

"USD/BRL has staged a steady rebound after carving out an interim low around 4.88 last month. It is now inching toward the confluence of the 200-DMA and a multi-month descending trend line near 5.25."

"It will be important to monitor whether the pair can form a base and gradually transition into a trend reversal. The March high around 5.32/5.34 is likely to act as a key resistance zone."

"There would be a risk of resumption in downtrend if the pair fails to defend the recent pivot low around 4.99."

"The Bovespa slipped below 170k for the first time since late January. FPIs sold BRL3.42bn of Brazilian equities this month to 9th June."

"BCB president Galípolo asserted the domestic economy is holding up well on a relative basis in the face of Middle East conflict and US tariff concerns. Brazil plans to issue sovereign bonds in China, after tapping euro market earlier this year."