Dollar Breaks A Key Long-Term Line As Brazil’s Rate Path Shifts

Key Points

• USD/BRL stayed near R$5.19 after the Copom opened the door to cuts in March.
• The Fed held rates, but the policy split and election-year pressure kept the dollar uneasy.
• A rare technical signal hit on Jan. 26: the pair fell below the weekly 200-period moving average.

The dollar extended its slide against the real, ending Thursday at R$5.1936, down 0.25% and still near its weakest level since May 2024.

The session was choppy. Wall Street risk sentiment deteriorated at times, yet the real held firm as Brazil’s interest-rate story regained center stage.

Abroad, the dollar softened again. The DXY index was down 0.16% late in the day near 96.282, even after markets digested the Fed’s decision from the previous session.

The central bank kept rates unchanged at 3.50%–3.75% and effectively paused the easing cycle that began last September. The vote was not unanimous.

Directors Stephen Miran and Christopher Waller backed a 0.25-point cut, a split that kept traders focused on how political pressure could shape the next phase of U.S. policy.

President Donald Trump renewed calls for lower rates and said he would name the next Fed chair next week. Betting markets leaned toward a high-profile private-sector pick, reinforcing the sense that the Fed’s direction could become a headline-driven variable again.

In Brazil, the Copom held the Selic at 15% for a fifth consecutive meeting. The decision was unanimous, but the message was the market mover.

The committee said it expects to begin easing at its next meeting if the baseline scenario holds, while stressing that the size and pace will depend on confidence in inflation converging to target.

Rates traders reacted quickly, lifting bets that March could bring a 0.50-point cut to 14.50%, even if the first move ends up smaller.

Commodities added another tailwind. Brent for April settled up 3.29% at $69.59, supporting a currency that still trades like a leveraged play on export prices.

Domestic data were mixed. Caged showed 618,164 formal job losses in December, the worst for the month since 2020.

The 2025 balance remained positive at 1,279,498 jobs, though well below 2024. Economists flagged seasonal distortions and possible payback in January.

Politics stayed in the background. A Paraná Pesquisas poll showed President Lula leading first-round tests, but tighter second-round matchups against Flávio Bolsonaro and Tarcísio de Freitas.

Technically, the drop is now structural. On Jan. 26, USD/BRL crossed below the weekly 200-period moving average, a break last seen on May 23.

The charts show momentum still bearish, with daily RSI in the mid-20s and the pair hugging support around 5.17–5.19. A rebound needs to reclaim 5.23–5.26 first, then 5.29.

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