The Big Three

01Session Data

02FX Drivers

03Market Commentary

The real extended its winning streak to a third session on Monday, closing at 5.1693 — the lowest since late May 2024 — despite a hostile global backdrop. The dollar opened firmer at 5.19 following Trump’s weekend escalation of Section 122 tariffs from 10% to 15%, but the bid dissolved within the first hour as exporters lined up to sell. By midday, the pair had plunged to an intraday low of 5.1392, only to retrace to near-flat by the close as Wall Street’s afternoon selloff triggered a mild risk-off bid for the greenback.

The session exposed a growing disconnect between dollar weakness in Brazil and dollar resilience elsewhere. The DXY barely moved (−0.01% to 97.70), yet the real outperformed because the flow dynamics are now locally dominated. The BCB’s decision to hold off on FX intervention — and its near-complete March swap rollover — signals that policymakers are comfortable letting the market find its own level. The 4intelligence research group noted that positive FX inflows, improved sovereign risk perception, and sustained dollar weakness have collectively reduced demand for BCB hedging instruments.

Pantheon Macroeconomics’ Andres Abadia argued that the real has benefited more than its LatAm peers because of Brazil‘s combination of high real yields and deep market liquidity. The BRL is now the best-performing major EM currency year-to-date, down 5.84% against the dollar. WHG’s Fernando Fenolio went further, calculating fair value at R$4.90 and suggesting the real could reach 4.70 or even 4.50 if the global dollar decline continues. His logic: the SCOTUS tariff strike-down caps US pressure on Brazil at 15%, which is structurally positive for the trade balance.

The Treasury market reinforced the BRL-positive narrative. The 10-year yield fell 5 basis points to 4.03% — its lowest in nearly three months — as AI displacement fears and tariff uncertainty drove a flight to safety. Fed Governor Waller’s speech added nuance: he described the March rate decision as a “coin flip” contingent on February’s jobs report, and dropped the bombshell that 2025 payrolls will likely be revised to negative growth. If the February data disappoints, Waller will push for a cut, widening the Selic-Fed spread further and intensifying carry inflows into BRL.

04Technical Analysis

Daily (1D):

USD/BRL closed at 5.1693, hovering just above the lower Bollinger Band at 5.1553 — a critical short-term floor. The Tenkan-sen (5.1718) and current price are virtually overlapping, confirming the pair is trading right at its fast equilibrium line. The Kijun-sen sits well above at 5.2140, and both Senkou Span A (5.2048) and Span B (5.2353) define the Ichimoku cloud between 5.20–5.24, which now acts as the primary resistance zone. The 200-SMA at 5.3732 remains distant overhead, underscoring the depth of the structural downtrend from the December 6.09 peak.

Momentum indicators are bearish but approaching oversold territory. The RSI reads 37.92 on the fast line and 34.62 on the slow — both below the neutral 50 line and drifting toward the 30 oversold threshold. The MACD lines at −0.0372/−0.0393 are deep in negative territory, though the histogram has ticked to 0.0021, hinting at a marginal loss of bearish momentum. A break below the lower Bollinger Band (5.1553) would target the May 2024 low at 5.1150, while a bounce from current levels would face layered resistance through the cloud at 5.20–5.24.

05Forward Look

State of the Union and Tariff Sequencing.

Trump delivers the State of the Union address Tuesday evening. Markets will parse any new trade-policy signals — particularly whether additional Section 122 escalations are telegraphed or whether the administration pivots to bilateral negotiations. The 150-day statutory clock on the current 15% tariffs expires in late July, creating a hard deadline for any replacement framework.

US Data Calendar: NFP and CPI.

The February employment report drops March 6, followed by CPI on March 11 — both ahead of the March 17–18 FOMC meeting. Waller has explicitly framed the March decision as data-dependent: a weak NFP print would tilt toward a cut, widening the carry differential and accelerating BRL appreciation. A strong report would cement the hold and could trigger a tactical USD bounce toward 5.20–5.24.

Copom and Rate Path.

The BCB’s next rate decision on March 17–18 coincides exactly with the FOMC. Focus survey expectations now call for the Selic to end 2026 at 12.13%, implying roughly 300bp of cuts ahead. The pace and timing of that easing cycle will determine whether the carry trade unwinds gradually or abruptly — and whether the real can sustain levels below 5.20 through the election cycle.

Verdict

The structural case for BRL strength remains intact. The 15% Selic, a $4.3 billion January trade surplus, accelerating export flows to China, and the SCOTUS-imposed tariff ceiling all provide fundamental support. The Focus survey’s seventh consecutive week of falling inflation expectations and declining year-end FX forecasts confirm that the consensus is moving decisively toward a stronger real.

Tactically, the pair is stretched. The RSI at 37.92 is approaching oversold territory, and the close at 5.1693 sits just 14 pips above the lower Bollinger Band. A short-term bounce into the 5.20–5.24 cloud zone would be healthy and consistent with the technical setup. But any bounce that fails to reclaim the Kijun-sen at 5.2140 would simply confirm the bearish trend and set up a test of the May 2024 low at 5.1150.

The macro trigger is clear: February NFP (March 6) and CPI (March 11) will determine whether Waller’s “coin flip” lands on cut or hold. A dovish outcome extends the carry trade and could push USD/BRL through 5.10. A hawkish surprise buys time for the dollar but is unlikely to reverse the structural downtrend given the domestic fundamentals.

Bias: BEARISH USD/BRL (BRL BULLISH) · structural downtrend, tactically oversold