USD/BRL tests August lows ahead of key Brazilian data

• USD/BRL declined towards 4.8475 and has already lost more than 2% in September.
• On Tuesday, markets expect the central bank’s primary surplus to come in at BRL 16.8 billion.
• The USD trades soft, consolidating ahead of Wednesday’s Fed meeting.  

In Monday’s session, the USD/BRL continued to lose ground and has already tallied a 2.17% decline in September, falling to its lowest point since mid-August at 4.8475. 

On the BRL’s side, it is gaining ground as the Brazilian government has taken up fiscal reforms, which are expected to positively impact the government’s account. On Tuesday, budget data will be reported, with the primary surplus expected to have doubled to BRL 16.8 billion in relation to March’s  BRL 7.1 billion. In addition, the Real may also gather momentum on the outcome of Gross Domestic Product (GDP) and Trade data on Thursday.

On the USD side, it is trading soft against its rivals, with its DXY index consolidating. However, the US Treasury yields are still high, cushioning its losses. Regarding the Wednesday Federal Reserve (Fed) meeting, markets expect a hawkish pause, with the bank signalling that the tightening cycle isn’t done yet. Investors will also monitor fresh macro forecasts and revised dot plots to continue modelling their expectations towards the upcoming meetings. In that sense, the tone of the Fed will impact the price dynamics of the US Dollar and hence could limit the downside of the pair.

USD/BRL Levels to watch 

Technical indicators on the daily chart indicate that the USD/BRL sellers hold the upper hand. The downward slope of the Relative Strength Index (RSI) reinforces this negative sentiment, as does the MACD, which is displaying red bars, indicating a strengthening bearish momentum. Moreover, the pair is below the 20,100 and 200-day Simple Moving Averages (SMAs), suggesting that the bears are firmly in control of the bigger picture.

 Support levels: 4.8427, 4.8115, 4.7880.

 Resistance levels: 4.8902 (100-day SMA), 4.9143 (20-day SMA), 4.9450.

USD/BRL Daily Chart