The recent decline in the dollar has caught market attention. But is this devaluation a global movement or a local phenomenon? To better understand, let’s first analyze the DXY (Dollar Index, which measures the strength of the U.S. currency against a basket of foreign currencies) and then the dollar against the Brazilian real (USD/BRL).
DXY: The Dollar Against the World
The DXY reflects the performance of the dollar against major currencies such as the euro, British pound, Japanese yen, and Swiss franc. When this index falls, it means that the dollar is weakening globally, not just against the real.
Monthly Chart: Downtrend?
- The DXY formed a higher high and seemed to initiate a new uptrend but failed to sustain the movement and entered a correction.
- The retracement reached 61.8% Fibonacci, a key level. If this support is lost, the dollar could target 100.000 points on the index.
- The break of this support could indicate a stronger long-term downtrend.
Weekly Chart: Room for Short-Term Correction
- On the weekly chart, the dollar remains in a downtrend, with lower highs and lower lows.
- However, there is room for a short-term corrective rally, possibly reaching 106.000 points before resuming the decline.
- The Relative Strength Index (RSI) suggests that whenever the DXY reaches levels close to 30, there are good long-term dollarization opportunities.
Dollar Against the Brazilian Real (USD/BRL)
After understanding the global context, we analyze the dollar’s behavior against the real.
Monthly Chart: Heading to R$ 5.50?
- Currently, the dollar is trading near R$ 5.64.
- The recent movement formed a bullish pivot, breaking above a high and moving above the moving average, pushing the dollar to R$ 6.30.
- If the downtrend continues, the 50% Fibonacci retracement at R$ 5.50 may be tested.
- If this support is lost, the dollar could reach R$ 5.30, which aligns with key past levels.
Weekly Chart: Bearish Structure
- The dollar has formed a lower high and is breaking previous support levels.
- The break of R$ 5.50 could accelerate the depreciation of the U.S. dollar against the real.
- The RSI is below the equilibrium level, indicating that momentum is with the sellers.
Daily Chart: Correction or Continued Decline?
- On the daily chart, there is a minor bearish pivot, which has already reached the third Fibonacci target.
- This means that from now on, the main references will be based on the weekly chart targets.
- If there are short-term rebounds, they may only be corrections within the broader downtrend.
Conclusion: What to Expect from the Dollar?
- DXY in a downtrend suggests that the dollar may continue to weaken globally.
- USD/BRL with support at R$ 5.50 and R$ 5.30 may benefit the real in the short term.
- Short-term rebounds may occur, but the dominant trend remains bearish.
- The appreciation of the real is not solely due to Brazil’s economic strength but rather the global weakening of the dollar.
For those looking to trade the dollar, the best option in Brazil is the mini dollar futures. BTG Pactual, the largest investment bank in Latin America, offers this opportunity, along with fixed-income and international market investments.
Stay alert to market trends and conduct your own technical analysis before making decisions.
If you enjoyed the content, share it, and see you next time!
-> Check out the video: