Looking at the recent changes in Brazil the technicals and fundamentals are lining up for a stronger BRL.
BRL may open stronger Thursday, as the central bank delivered an expected 50bp rate cut, but notably removed the following sentences from the statement.
“In the Copom evaluation, the evolution of the basic scenario and the balance of risks prescribes an adjustment in the degree of monetary stimulus, with a reduction of the Selic rate by 0.50 percentage points. The Committee considers that the consolidation of the benign scenario for prospective inflation should allow an additional adjustment of equal magnitude."
It also took out the phrase "in any further adjustments in the degree of stimulus" from the following line in the October statement: “The Copom understands that the current stage of the economic cycle recommends caution in any further adjustments in the degree of stimulus.”
- S&P followed the rate decision by upgrading Brazil’s outlook from stable to positive.
Looking at the technicals the EUR/BRL is currently at the Monthly Pivot and is making lower highs and lower lows - finding resistance above. There is a lot of possible liquidity below the Yearly Pivot as this acted as strong support from the summer.
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