The Brazilian real experienced a dramatic reversal on Thursday evening, surging from 5.66 to 5.72 against the dollar in what technical analysts describe as one of the most significant intraday moves in recent weeks.
The currency pair jumped approximately 1% during after-hours trading, breaking through multiple resistance levels that had contained the real since mid-May.
Chart analysis reveals the real broke decisively above the 50-day moving average at 5.74, marking the first sustained breach of this technical barrier since early May.
The evening surge pushed the pair through key resistance at 5.70, a level that had acted as a ceiling for the currency throughout the previous week.
Volume indicators show substantial participation in this move, suggesting institutional involvement rather than retail speculation. The RSI indicator spiked from neutral territory near 50 to approach 67, indicating strong momentum but not yet reaching overbought conditions.
Real Plunges to 5.72 as Thursday Evening Surge Reverses Dramatically. (Photo Internet reproduction)
MACD momentum turned decisively positive during the evening session, with the signal line crossing above the histogram for the first time since May 15.
Bollinger Bands expanded significantly, indicating increased volatility and potential for continued movement in either direction. This technical breakout follows days of consolidation between 5.66 and 5.69, creating what traders call a “coiled spring” effect.
Brazilian Real Weakens Sharply Amid IOF Tax Uncertainty
The real had been testing resistance repeatedly since Tuesday, building pressure that finally released in Thursday’s explosive evening move. Support levels now shift higher to 5.69 and 5.71, while immediate resistance emerges at 5.74 and 5.77.
The timing of Thursday’s surge coincided with Finance Minister Fernando Haddad’s confirmation of IOF tax changes, though he provided limited details about the scope and implementation.
Market participants interpreted the lack of specificity as potentially less severe than initially feared, triggering the sharp real weakening that pushed USD/BRL higher.
Federal data shows the exchange rate reached 5.7177 on Thursday, representing a 1.27% increase from Wednesday’s close of 5.646. This marked the largest single-day move for the currency pair since early May, when similar volatility characterized trading around fiscal policy announcements.
Brazil’s monetary policy backdrop continues supporting dollar strength against the real. The Selic rate stands at 14.75%, but growing fiscal concerns have begun to offset the carry trade appeal.
The government’s announcement of 31.3 billion reais in budget adjustments exceeded market expectations, yet uncertainty around IOF implementation created additional pressure on the currency.
Thursday’s evening surge represents a critical technical inflection point, breaking the real’s month-long consolidation pattern and establishing new parameters for the currency pair’s near-term trajectory.
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