Brazilian Real Under Pressure

As market volatility has come back with a vengeance and the US Dollar continues to remain strong, one EM currency that has been hit particularly hard this year has been the Brazilian Real (USDBRL). 

Sluggish growth forecasts, coupled with waning support for the Brazilian President has sent the Brazilian Real to its lowest level of the year thus far. The sharp declines have also been fueled by uncertainty over the US-China trade talks on the macro level. The combination of the two forces, the external macro headwinds and feeble domestic economy, have been a perfect storm for the under-performance of USDBRL in 2019 thus far. 

Furthermore, on a technical basis, the USDBRL continues to show deterioration within the Brazilian Real, with the 10-day EMA being a strong support for the currency pair. 

We believe if this continues, USDBRL 4.25 is the next stop. 

USDBRL showing weakness in recent trade sessions.

USDBRL showing weakness in recent trade sessions.