BRAZIL: Bearish USDBRL Tone Intact, Lula Meets EU Foreign Affairs Chief
Sep-19 10:37
- USDBRL continues to hold near cycle lows following this week’s Copom meeting, with the pair closing yesterday largely unchanged around the 5.31 handle. With the Copom maintaining its hawkish guidance for keeping the Selic rate at current levels for “a very prolonged period” to ensure the convergence of inflation to target, the BRL’s carry profile will remain attractive ahead.
- Most analysts continue to expect the Copom to remain on hold for the remainder of this year, with an easing cycle beginning in early 2026, although a minority still see scope for a rate cut before year-end. (See the MNI review of the Copom meeting here.)
- A bearish tone in USDBRL remains intact, with sights on 5.2405, the Jun 6 2024 low and the 5.2000 handle. Initial resistance is at 5.3884, the 20-day EMA.
- Today, the BCB will hold a $2bn FX credit line auction for the rollover of contracts expiring on Oct 2 at 1530BST(1030ET). No macro data are due, with focus next week on the Copom minutes on Tuesday and BCB monetary policy report on Thursday. IPCA-15 inflation data also cross next week.
- On the political front, President Lula has a meeting with the EU Foreign Affairs Chief Kaja Kallas in Brasilia at 1500BST(1000ET).
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SONIA: Calendar spreads are dominating the flows
Aug-20 10:37
Dominating flow in the Sonia strip, not too surprisingly has been in Flatenners following the touch higher UK Inflation.
Aside from the 11k SFIU5Z5 spread that has traded in 11.8k, pushing back Rate cut bets.
- SFIZ5/H6 has traded in 31k spread to the downside.
- SFIZ5/M6 in 22k also to the sell side.
- SFIZ5/Z6 has traded in 51.1k lots, mostly to the sell side.
The SFIZ5/H6, SFIZ5/M6 have seen their largest single moves since the US NFP, but for the SFIZ5/Z6, this the most notable single move since 8th May.
OUTLOOK: Price Signal Summary - GBPUSD Bull Cycle Still In Play
Aug-20 10:36
- In FX, a consolidation mode dominates for now in EURUSD. The trend set up however, remains bullish. A resumption of gains would expose key resistance and the bull trigger at 1.1829, the Jul 1 high. Clearance of this level would resume the uptrend. Support to watch lies at 1.1588, the 50-day EMA. Major support rests at 1.1392, the Aug 1 low.
- The latest pullback in GBPUSD for now, appears corrective and a bullish condition remains intact. Recent gains resulted in a breach of resistance at 1.3589, the Jul 24 high. This signals scope for a climb towards 1.3636, the 76.4% retracement of the bear leg between Jul 1 and Aug 1. Initial firm support to watch is 1.3449, the 50-day EMA. A clear break of it would signal a possible reversal.
- USDJPY remains in consolidation mode. A bearish threat is present as the pair trades closer to its recent lows. Sights are on support at 145.86, the Jul 24 low. Clearance of this level would highlight a stronger S/T reversal and strengthen the bearish engulfing signal on Aug 1. This would open 144.69, a trendline drawn from the Apr 22 low. Initial firm resistance to watch is 148.52, the Aug 12 high.
OPTIONS: Larger FX Option Pipeline
Aug-20 10:35
- EUR/USD: Aug21 $1.1600(E1.3bln), $1.1700(E1.6bln), $1.1750(E2.0bln), $1.1800(E3.0bln); Aug25 $1.1640-55(E2.0bln)
- USD/JPY: Aug21 Y145.95-00($1.2bln), Y146.70-80($1.8bln); Aug22 Y147.90($1.4bln)
- AUD/USD: Aug21 $0.6590-00(A$1.8bln); Aug25 $0.6510-25(A$1.1bln)
