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U.S. DOLLAR / BRAZILIAN REAL REFERENCE RATE

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BRL vs USD on 8 month's highs after descending triangles' baseBRL against USD hits at 3.4850 to flash a fresh 8 months highs. USDBRL forms a descending triangle pattern which is bearish continuation trend. After the pair (USDBRL) breaking below the baseline of descending triangle it has been losing upswings momentum completely. Leading oscillators are also converging to these dips signal to momentum in selling pressures. Current prices have slid way below DMAs, while MACD's bearish crossover indicates ongoing downtrend to prolong further. The occurrence of "shooting star" at 4.0093 and "hanging man" pattern at 4.0166 on monthly charts signal more bearish potential as leading & lagging indicators substantiate the bearish pressures. Contemplating above technical observations, we could foresee more dips in the days to come, the best way to tackle this trend is to remain short in mid-month futures at every rallies for targets upto 3.1980 levels.
Short
by FxWirePro
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Brazilian Real evidences 7-month highs in just 1-monthOn daily charts, USDBRL has formed descending triangle. The prices have been consistently below 21DMA, price slumps have remained below sloping side of the triangle ever since it has dropped from the resistance at 4.0145 levels. RSI is in convergence to the declining trend. While, %D crossover on stochastic oscillator signals selling momentum is intensified. On a broader perspectives, "shooting star and hanging man" patterns were traced out back to back. Ever the formation of these bearish patterns, we've seen huge dips as the rejection of resistance at 4.0145 levels brings in little weakness in this pair. RSI and Stochastic curves are also in conformity to the these dips, Bearish crossover (%D at  and %K at ) seen on stochastic above overbought zones. MACD is in an attempt to show bearish convergence too. Overall, as we've seen dips from the peaks of 4.2476 to the current 3.5637 levels (almost 16.11%), which makes the BRL the "7-month highs" in just a span of one month. For now, the trend looks more bearish  bias as it has broken out the triangle baseline at 3.58 levels.
by FxWirePro
BRL short term gains unlikely to sustain, uptrend to resumeTechnically, USDBRL has been losing upswings momentum as the rejection of resistance at 4.0050 levels and as soon as the pair approached 21DMA the bears began pushing downwards, in between a hanging man pattern is formed on rallies to signal weakness in previous upswings, leading oscillators are also converging these price declines. The next strong support is only seen at 3.9550 levels. Nevertheless, this week markets are back to full-time activity as the carnival festivities are over. The main domestic price drivers in the weeks to come are likely to be the usual suspects: lack of political cohesion and concerns about the fiscal consolidation. The government postponed the budget announcement to March, heightening concerns about its commitment to the current budget target (primary surplus of 0.5% of GDP). Furthermore, there are discussions on introducing a range for the primary surplus target. In terms of data, the highlight of the week is December retail sales. We forecast a 2.0% decline in the retail sales index, partially paying back the increase in November due to the Black Friday sales. For the broader index, the fall of 6.3% m/m sa in auto sales should contract the retail sales index by 2.7% m/m during the month, representing a 8.7% decrease for the whole year. Concerns about the fiscal consolidation, and the likely resumption of political infighting will keep weighing on local assets. Central banks that uphold pegs have been under strain after tumbling commodity prices and slowing global growth weakened currencies from Brazil to Russia by at least 18 percent in the past year. We maintain our long USDBRL recommendation and keep long exposure to real rates as Brazil enters a regime of fiscal dominance.
by FxWirePro
USD/BRL spikes on cards, hedge upside risks via bull call spreadOff late retracements in USD versus emerging market currencies looks overdone, but BRL will likely underperform on any risk-off event. We foresee BRL as one of the most vulnerable currencies because of looming idiosyncratic risks. Brazil is running the highest real interest rate in the world. Furthermore, debt to GDP is amongst the highest across EM. While, The Brazilian GDP shrank 1.7% on quarter in the last three months to September of 2015, worse than market projections. It is the 3rd consecutive contraction in a row as investment shrank for the 9th straight quarter and household spending posted the third consecutive fall. The combination of high real interest rates, negative growth and rising debt to GDP puts Brazil in similar debt dynamics to those observed in Greece back in 2010. The main difference between Brazil now and Greece in 2010 is that Brazil can monetize. In other words, unlike Greece, Brazil can print its own currency to service its local debt. This could very well be one of the solutions to improve the fiscal outlook. Higher inflation could reduce as much as a third of the domestic debt market, which is not linked to inflation and has reasonably long-dated tenors. We continue to carry bullish attitude in USDBRL and would eye in buying dips within the range. The 3.8400 range lows provide nearby support. Our initial upside targets are toward the 4.0470 area. Beyond there would signal further upside toward the greater range highs near 4.1720 and then the 4.2480 2015 peak. We recommend going long USDBRL in 1M (1.5%) in the money 0.71 delta call and simultaneously short 2W (2.5%) out of the money call with positive theta and delta closer to zero for net debit, as the recent retracement in USD versus emerging market currencies looks overdone and BRL will likely underperform on any risk-off event. We view BRL as one of the most vulnerable currencies because of looming idiosyncratic risks.
by FxWirePro