Bias: Bearish-to-range-bound, current USD/BRL sits below its 90-day average and in the lower half of its 3-month range.
Key drivers:
- Rate gap: The US Federal Reserve is expected to ease toward neutral in 2026, whereas Brazil keeps policy tight, widening the USD-BRL rate gap.
- Oil/commodities: Oil is above its 3-month average and volatile, which tends to support BRL via higher Brazil’s commodity income.
- Macro factor: Inflation in Brazil staying above target keeps the central bank in a tightening stance, which could support BRL if policy action is taken.
Range: The pair is likely to drift toward the lower end of the 3-month range, staying within its recent bounds.
What could change it:
- Upside risk: Stronger US payrolls or a hawkish tilt from the Fed could push the dollar higher.
- Downside risk: A dovish shift from the Fed or clearer BRL policy easing could pull USD/BRL lower.
