EUR/BRL holds steady as mixed technical signals balance bullish and overbought readings

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Euro vs Brazilian Real falls 0.69% today

Highlights

The Brazilian real saw a sharp decline after President Luiz Inacio Lula da Silva secured a fourth term, causing risk aversion in local assets.
Both BRL currency and equities came under pressure as investors withdrew positions in response to heightened political uncertainty.
EUR/BRL trades with strong bullish momentum, high probability for an up move, and an expected range of R$5.8643 to R$6.1427.

Political volatility hits real as Lula win sparks risk aversion

The Brazilian real experienced a sharp sell-off following President Luiz Inacio Lula da Silva's victory for a fourth term, marking a significant political development that triggered broader risk aversion in Brazilian assets, according to Rallies. On October 26, this surprise election result led to increased uncertainty and drove investors to exit BRL positions, as both the currency and equities came under pressure, Centraloregondaily reported. The episode underscores the close link between political events and short-term currency dynamics, with market participants reacting quickly to perceived policy risks.

Bullish bias faces caution as technical signals diverge

On the hourly chart, EUR/BRL is holding above the MA-20 at R$5.9412 and MA-50 at R$5.744, while the pair remains above the MA-200 on the daily at R$5.8847. The Ichimoku Kijun provides immediate support at R$5.8611. Momentum is broadly positive, with both MACD and ADX signaling a strong buy bias. RSI is at 70.3, indicating overbought conditions, while Stoch RSI is in the oversold range. CCI shows a neutral stance, Bull/Bear Power favors buyers, and Awesome Oscillator remains neutral. Mixed signals across some oscillators highlight the need for caution, as elevated RSI is countered by an oversold Stoch RSI.

High upside odds as range-bound trade signals limited downside

In the short term, EUR/BRL is expected to trade within the range of R$5.8643 to R$6.1427. The probability of further upside is assessed as very high (above 80%), while the likelihood of a significant downside move is considered very low (under 20%). If the pair maintains current levels, price action may consolidate within this band. A breakout above resistance could trigger a bullish extension, whereas a decline below the Ichimoku Kijun support would open the door to a potential retracement.

Anton Kharitonov, analyst at Traders Union, sees technical momentum for EUR/BRL pointing up, but recent political turbulence clouds the outlook. He notes the pair is overbought on RSI, while mixed oscillator signals call for caution. Broader risk sentiment around Brazilian assets remains fragile after the post-election sell-off. "Despite the apparent upside momentum, I prefer to stay cautious and wait for a clean break above R$6.1427 or a confirmed retest of support before committing capital."

Earlier, analysts noted that persistent political uncertainty in Brazil had driven pronounced weakness in the real and furthered upside momentum in the euro/real pair. The current data support this outlook, highlighting that traders should closely monitor for any breakout above resistance as a potential trigger for a renewed bullish extension.

Source of Data: EUR Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

The information is based on forecasts and does not constitute investment advice or a guarantee of future results. Market conditions may change. See our Disclaimer and Editorial Integrity for details.