USD/BRL retakes the 20-day SMA after Brazilian inflation data

USD/BRL rose to a high near 4.9680 and then settled at 4.9450.
Brazilian IPCA from August showed no surprises.
Markets are cautious, awaiting inflation figures from the US on Wednesday.

Patricio Martín FXStreet

The USD/BRL gathered momentum in Tuesday’s session after the BRL decline after the release of the Brazilian inflation figures from August. On the USD side, it is recovering ground after trading soft on Monday while markets seem cautious ahead of Wednesday’s inflation readings from the US.

The Instituto Brasileiro de Geografia e Estatistica revealed that the IPCA inflation advanced 0.23% MoM and matched expectations.

Recent upward movements of the pair may be attributed to recent rate cuts by the Bank of Brazil’s Monetary Policy Committee (COPOM), and markets are expecting the bank to cut further the target rate next week by 50 basis points to 12.75% which could exacerbate the downside for the Brazilian currency.

On the other hand, the USD is trading firm against its rivals, driven by a cautious market mood and US Treasury yields remaining high. That being said, Wednesday’s Consumer Price Index (CPI) figures will be crucial for the Greenback’s and bond price dynamics as they will play a big rol in modelling expectations of the next Federal Reserve (Fed) decisions. As for now, a pause in next week’s meeting is practically priced in while there's still a 40% chance of one last interest rate hike in either December or November, according to the World Interest Rate Probabilities tool.

USD/BRL Levels to watch

Observing the daily chart, USD/BRL displays a neutral to bullish technical outlook for the short term as the bulls gain momentum. The Relative Strength Index (RSI) demonstrates a favourable upward trend above its midline, while the Moving Average Convergence (MACD) shows stagnant red bars. Additionally, the pair is above the 20 and 100-day Simple Moving Averages (SMAs), but below the 200-day SMA, suggesting that the bulls are in command over the bears on the bigger picture.

Support levels: 4.9350 (20-day SMA), 4.9330, 4.9150.

Resistance levels: 4.9680, 4.9840, 4.9900.

USD/BRL Daily Chart

USD/BRL

Overview
Today last price	4.9451
Today Daily Change	0.0140
Today Daily Change %	0.28
Today daily open	4.9311

Trends
Daily SMA20	4.9378
Daily SMA50	4.8734
Daily SMA100	4.8975
Daily SMA200	5.0359

Levels
Previous Daily High	4.9871
Previous Daily Low	4.9211
Previous Weekly High	4.995
Previous Weekly Low	4.9072
Previous Monthly High	4.9981
Previous Monthly Low	4.7239
Daily Fibonacci 38.2%	4.9463
Daily Fibonacci 61.8%	4.9619
Daily Pivot Point S1	4.9058
Daily Pivot Point S2	4.8804
Daily Pivot Point S3	4.8398
Daily Pivot Point R1	4.9718
Daily Pivot Point R2	5.0124
Daily Pivot Point R3	5.0378

Author

Patricio Martín

FXStreet

Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.

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