Dollar Holds Firm Against Real as IOF Uncertainty and Weak Trade Data Shape Market

The U.S. dollar traded at 5.4210 to 5.4248 Brazilian reais on the morning of July 5, 2025, according to official exchange data and market charts.

The previous session closed with the dollar up 0.37 percent, while the week saw the greenback lose 1.06 percent against the real.

The market responded to a mix of judicial, fiscal, and macroeconomic developments, with all figures and context sourced from official government releases and trading platforms.

The main driver for the session came from the Supreme Court’s decision to suspend presidential decrees that raised the IOF, Brazil’s tax on financial operations.

Justice Alexandre de Moraes called for a conciliation hearing between government branches, which injected uncertainty and reduced liquidity.

The Finance Minister stated that the government’s IOF changes aimed to correct tax evasion, not to increase taxes across the board.

Congressional leaders rejected the idea that this dispute signals a break with the government, emphasizing their support for tax relief for lower earners.

The market also digested Brazil’s June trade surplus, which reached $5.889 billion. This figure fell short of the $6.45 billion forecast by economists and marked a 6.9 percent drop from the previous year.

The weaker surplus weighed on the real, as it signaled softer export performance and less foreign currency inflow.

Dollar Holds Firm Against Real as IOF Uncertainty and Weak Trade Data Shape Market

The U.S. Dollar Index (DXY) closed at 96.98, down 0.14 percent overnight and 0.29 percent for the week.

The U.S. holiday led to lower trading volumes, which amplified the impact of local news on the real. No significant inflows or outflows were reported for BRL-focused ETFs, and overall liquidity remained thin.

Technical analysis of the daily chart shows a persistent downtrend for USD/BRL since early June. The price remains below key moving averages, including the 50, 100, and 200-day lines, confirming a bearish structure.

The Relative Strength Index (RSI) hovers near 35, indicating the market approaches oversold territory but has not yet reversed.

The Moving Average Convergence Divergence (MACD) remains negative, showing continued bearish momentum.

Bollinger Bands reveal that the price stays near the lower band, reflecting sustained selling pressure and low volatility.

The four-hour chart confirms the daily trend, with the price consolidating after a sharp drop.

The MACD histogram shows a slight reduction in bearish momentum, but the RSI remains below 40, signaling ongoing selling. The price stays below the Ichimoku cloud, which supports the bearish outlook.

Brazil’s high Selic rate of 14.75 percent continues to attract carry trade inflows, but the weaker trade surplus and judicial uncertainty limit the real’s gains.

The market remains cautious, with participants watching for further developments in the IOF dispute and upcoming U.S. economic data.

The technical and fundamental signals both point to a market that favors the real in the medium term, but short-term volatility persists as traders react to each new headline.