The USD/BRL exchange rate continued its strong downward trend this month, reaching its lowest level since March 24, making the Brazilian real one of the best-performing currencies in the market.
The pair dropped to 4.9535 and is in its sixth consecutive week in the red after falling by over 21% from its highest point in December 2024.
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Brazilian Real is in a Strong Bull Run
The USD/BRL exchange rate continues its strong downward trend as the Brazilian real gained steam. Recent macro data showed that the country’s economy is still struggling, with economic growth stalling and inflation rising.
A recent report showed that the headline consumer price index jumped to 4.14% in March, its highest level since January, and a big increase from February’s 3.81%. Inflation rose as the country dealt with the ongoing Iran war.
Another report showed that the economy expanded by 1.8% in the fourth quarter, matching the growth rate of the third quarter. This growth was the lowest rate since the second quarter of 2022.
As a result, the central bank decided to slash interest rates in the last meeting. It dropped the selic rate from 15% to 14.75%, lower than the expected 50 basis points that analysts were expecting.
On the positive side, some top Brazilian exports are doing well, helped by the strong agricultural products. Data shows that Brazil’s exports rose by 10% in March to $31.6 billion, up from the previous month's $26.2 billion.
The USD/BRL exchange rate also dropped as the US dollar continued falling. Data shows that the dollar index has dropped in the last four consecutive weeks and is hovering at its lowest level since March 2nd. The greenback has dropped amid the US-Iran ceasefire, which has led to a weaker demand for safe-haven assets.
USD/BRL Technical Analysis
The weekly timeframe chart shows that the USD/BRL exchange rate has continued its strong downward trend in the past two years, moving from 6.3115 in 2024 to the current 4.9535.
The Average Directional Index (ADX) has jumped to 20 and is pointing upwards, a sign that the uptrend is gaining momentum. Also, the Relative Strength Index (RSI) has dropped to the oversold level. It is trading at the 78.6% Fibonacci retracement level.
Therefore, the path of the least resistance is downwards, potentially to the key resistance level at 4.80.
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