The U.S. Dollar (USD) trades at a key psychological level against the Brazilian Real (BRL), quoted at R$5.00 per dollar on April 9. Meanwhile, Brazil faces increased international attention as a dispute heats between Elon Musk and a Supreme Court representative, Alexandre de Moraes.
From a technical perspective, the dollar trades above R$4.85’s historical support, in a shy short-term uptrend since January. Additionally, the USD went slightly above the 200-week exponential moving average (EMA) In the past few weeks, signaling strength.
The recent short-term action challenges a mid-term downtrend that comes from 2020, after reaching record highs at R$5.99. In particular, the Relative Strength Index (RSI) validates a potential mid-term reversal for the dollar due to a bullish divergence.
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As a result, this would weaken BRL in the forex market, diminishing the international purchasing power of people in Brazil. Interestingly, the Brazilian political landscape is in turmoil, which could impact real’s exchange rates against other currencies, like the dollar.
Censorship accusations could weaken BRL against USD
Notably, the political drama started with censorship accusations from Elon Musk against a Supreme Court judge, Alexandre de Moraes. In retaliation, de Moraes reportedly made political and legal moves against Musk’s companies. Specifically, the X Corp, while Brazilian politics threatened to end contracts with Starlink.
This scenario brings extreme uncertainty for international investors and companies, increasing the risks of financial exposure to Brazil.
Therefore, these recent events could lead to a capital outflow from the Brazilian real to the dollar and other currencies. This would likely increase the demand for USD in the country while decreasing the demand for BRL worldwide.
In consequence, this could fuel the aforementioned technical analysis and potentially drive USD/BRL to higher levels.
Nevertheless, further political and economic developments will continue to have a major impact on Brazil’s exchange rates. Investors and forex traders must closely follow the Latin American country to make profitable decisions moving forward.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
