Bias: Bearish-to-range-bound, as USD/BRL sits below its 90-day average and stays in the lower half of the 3-month range, signaling limited upside.
Key drivers:
- Rate gap: The US Fed is expected to ease policy toward a neutral stance while Brazil keeps restrictive policy, widening the gap that tends to support USD, for now.
- Risk/commodities: Oil is at monthly highs and more volatile, which can help BRL through stronger export income but also raise inflation worries that pressure the currency.
- Macro factor: Markets price a path of Fed easing toward neutral, a shift that could ease the dollar in coming months.
Range: Range: Expect USD/BRL to drift within its recent 3-month range, with a tilt toward the lower end, in a narrow band.
What could change it:
- Upside risk: stronger US data or hawkish Fed rhetoric could push the dollar higher.
- Downside risk: softer US data or clearer Brazil policy easing could lift BRL and push the dollar lower.
