Bias: Bearish-to-range-bound, USD/BRL sits below its 90-day average and in the lower half of the 3-month range.
Key drivers:
- Rate gap: The Fed is expected to cut rates modestly in 2026 while Brazil keeps policy tight at current high levels; this narrows the dollar-BRL gap and supports BRL.
- Risk/commodities: Oil is above its 3-month average and has shown volatility; higher oil tends to improve Brazil’s terms of trade, lending support to BRL.
- Macro factor: US labor market data, specifically payrolls and unemployment figures, will shape expectations for Fed easing and the dollar’s direction.
Range: The pair has moved in a roughly six percent band over the last three months and sits near the lower end of that range.
What could change it:
- Upside risk: Strong US jobs data or a firmer Fed stance that keeps the dollar firmer and delays cuts.
- Downside risk: A meaningful drop in oil or clearer signs of Brazil tightening, boosting BRL.
