USD/BRL to face tough resistance at the 5.35/37 zone – SocGen

USD/BRL is quietly inching up towards the upper boundary of the one-month range of 5.04-5.31. This could prove to be a stubborn resistance, according to economists at Société Générale.

See: USD/BRL set to surge higher above the 5.3138 July high – Commerzbank

Short-term price action could remain sideways

“The 100bp increase in the Selic rate to 5.25% and hawkish statement last week contained selling forces after the payrolls print, but stronger inflation data could invigorate bearish pressures and force investors to reassess how far the BCB could have to tighten beyond the neutral rate of 5.5%-6.5% to tame inflation.”

“Hawkish BCB minutes may temporarily allay concerns for the real whilst more structural headwinds brew in the background, including the country’s fiscal balance and next year’s presidential election.”

“Ongoing up move should persist towards 5.31 and 200-DMA at 5.35/5.37. This could be an important resistance zone.”