The Big Three

01Session Data

02Market Commentary

The dollar snapped a five-session losing streak against the real on Thursday, closing at R$5.1389 — up 0.27% from Wednesday’s R$5.1247, which had been the lowest settlement since May 21, 2024. The cumulative rally in the BRL of roughly 2.20% over the prior week had left the pair technically stretched, and the combination of pre-Ptax positioning and a risk-off global tone provided the trigger for a modest correction.

Bruno Shahini of Nomad attributed the move primarily to a technical adjustment ahead of the month-end Ptax fixing, noting that “the correction also reflected a more cautious external environment, given the uncertainties involving the US-Iran nuclear negotiations, which raised risk aversion and sustained demand for protection.” The dollar opened near flat at R$5.1217 but gained traction through the afternoon, hitting R$5.1655 (+0.80%) at 14h27 before pulling back into the close as the Ibovespa recovered from session lows.

The DI curve told its own story. After a morning backup driven by the Tesouro’s robust prefixados leilão — 20 million LTN and 8.5 million NTN-F at full allotment — rates collapsed in the afternoon. DI Jan/28 dropped 5bp to 12.485% and DI Jan/31 fell 3bp to 12.955%, as falling US Treasury yields (10Y down ~3bp to 4.01%) and the IGP-M deflation surprise combined to reinforce expectations of a 50bp Selic cut in March. Cristiano Oliveira of Banco Pine noted that “the combination of consistent IGP-M deflation with the prospect of weak GDP next week also contributed to the retreat in rates.”

The dollar’s bounce was modest by any measure. In the year, USD/BRL is still down 6.37%, reflecting the structural carry trade that continues to attract foreign capital at 15% Selic. The BRL’s outperformance against EM peers — it remains the strongest major EM currency year-to-date — has been supported by R$35.6 billion in equity inflows alone, plus the Tesouro’s $4.5 billion Global bond issuance that drew $12 billion in orders (2.7x coverage). Thursday’s uptick looks like noise within a dominant downtrend rather than a reversal signal.

03Technical Analysis

Daily (1D):

The daily chart shows USD/BRL trading well below the Ichimoku cloud, which spans the 5.28–5.41 area, confirming the deeply bearish (BRL-bullish) trend. Price is hugging the lower Bollinger Band at approximately 5.12, with the 20-day midline at 5.20 and the upper band near 5.28. The 200-day SMA sits at 5.4102 — some 5.3% above the current level — underscoring the magnitude of the real’s appreciation since December.

Momentum is deeply oversold. RSI reads 36.31 (fast) and 32.30 (slow), both firmly in the oversold zone below 40 — a level that historically precedes at least a tactical bounce. The MACD lines at −0.0412 / −0.0433 are negative and converging, with the histogram at −0.0022 barely negative and flattening. This configuration suggests the selling momentum is exhausting, though no bullish crossover has occurred yet. Thursday’s bounce from R$5.1217 to close at R$5.1389 is consistent with a nascent mean-reversion attempt, but a close above the Bollinger midline at 5.20 would be needed to signal a more meaningful reversal.

04Forward Look

Ptax Month-End Fixing on Friday.

The last business day of February brings the Ptax formation, which serves as the reference for futures contract settlement. The fixing typically amplifies intraday volatility as exporters, importers, and derivatives desks compete to move the rate. Expect wider-than-usual intraday ranges regardless of the directional bias.

IPCA-15 Sets the Copom Tone.

The preview inflation print (median 0.56%, range 0.39%–0.69%) will either solidify or shake the market’s conviction in a 50bp Selic cut on March 17-18. A reading below 0.50% would likely drive the DI curve lower and pull USD/BRL toward the May 2024 lows near 5.1163. An upside surprise above 0.60% could validate Thursday’s dollar bounce and extend it toward the Tenkan-sen at 5.1744.

US PPI and Iran Talks.

Friday also brings the US producer price index for January. With the 10Y Treasury yield approaching 3-month lows around 4.01%, any dovish data point could further compress the US-Brazil yield differential and support BRL. Meanwhile, a fourth round of US-Iran negotiations is expected next week in Vienna — an Iranian official told Reuters that a deal is possible if Washington separates nuclear and non-nuclear issues.

Caged and Q4 GDP Next Week.

Tuesday brings both the January formal employment data (Caged) and Q4 GDP. Porto Asset’s Okuyama flagged the possibility that job creation may undershoot expectations, which alongside the weakening GDP print would reinforce the Copom’s easing case and potentially accelerate the BRL appreciation trade.

Verdict

Thursday’s 0.27% bounce was a technical pause, not a trend reversal. After five consecutive sessions of BRL gains that pushed USD/BRL to May 2024 lows, the pair was overdue for a correction — and the confluence of Ptax positioning, Nvidia-driven risk aversion, and Iran uncertainty provided the excuse. The dollar’s inability to sustain the intraday high of R$5.1655 and the subsequent pullback into the close suggest limited conviction behind the bid.

The structural forces remain overwhelmingly BRL-positive. The yield differential at 15% Selic versus 3.50-3.75% Fed funds makes the carry trade enormously attractive. Foreign equity inflows of R$35.6 billion year-to-date provide a persistent dollar supply. The Tesouro’s $4.5 billion Global bond drew 2.7x oversubscription, confirming international appetite for Brazilian duration. And the DI curve is now pricing a full easing cycle that begins in March — which, counterintuitively, supports BRL in the near term by signaling that the Copom sees inflation risk receding.

The risk lies in the pair’s extreme positioning. RSI at 32-36 is the most oversold since the May 2024 move, and a violent bounce toward the Bollinger midline at 5.20 cannot be ruled out — particularly if IPCA-15 surprises to the upside or election noise intensifies. RBC Capital Markets calls short USDBRL their top EMFX trade for 2026, citing fat carry, cheap valuation, and a supportive easing cycle — though they flag the October presidential election as the main threat to the thesis. For now, dips toward 5.12 remain buying opportunities for BRL bulls.

Bias: BRL BULLISH · downtrend intact but RSI deeply oversold · watch IPCA-15 and Ptax for Friday volatility