US dollar to Brazilian real rate holds at high Selic: Can USD/BRL continue gains?

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US Dollar vs Brazilian Real up 1.01% today

Highlights

The Central Bank of Brazil kept the Selic rate steady at 13.75%, maintaining a high-yield environment for the real.
Annual inflation increased 4.63% through October, leading policymakers to pause further rate cuts to support local asset demand.
USD/BRL maintains a bullish trend with strong momentum and buyer dominance, trading in a projected range of R$5.5881 to R$5.6475, though extreme overbought conditions signal short-term pullback risk.

Carry trade demand persists as central bank holds rates steady

The Central Bank of Brazil has kept its benchmark Selic rate unchanged at 13.75%, according to Investing.com, maintaining the country’s high-yield environment and supporting the real against external pressures. Policymakers paused further rate cuts after Brazil’s inflation, measured by the IPCA, rose 4.63% year-on-year through October, a move detailed by Finimize. By preserving elevated interest rates, the central bank anchors carry trade returns and bolsters demand for local currency assets despite underlying inflationary risks.

Mixed momentum risk as overbought signals challenge bullish trend

Technically, USD/BRL is positioned above the MA-20 (R$5.5821), MA-50 (R$5.5807), and well above the MA-200 (R$5.1212). The Ichimoku Kijun provides immediate support at R$5.5875. Momentum indicators such as MACD and ADX remain on the Buy side, while RSI, Stoch RSI, and CCI are firmly in overbought territory—suggesting a risk of short-term correction even as broader momentum remains strong. Bull/Bear Power is positive at 0.0315, and the Awesome Oscillator also supports continued bullish momentum, but the unanimous overbought oscillator readings point to mixed signals near current levels.

Upside bias persists as consolidation limits near-term downside

In the near term, USD/BRL is likely to consolidate between R$5.5881 and R$5.6475, with the probability of further gains remaining very high and a low chance of a decline. The baseline scenario calls for price action to remain within this projected range. A bullish breakout above R$5.6475 could trigger additional upside, while a move below immediate support at R$5.5875 may open the way for a deeper pullback within the volatility band for the coming sessions.

Anton Kharitonov, expert at Traders Union, notes that the Central Bank of Brazil’s decision to hold the Selic rate at 13.75% keeps pressure on short-term rates and supports the real, but upward price action in USD/BRL is encountering stretched technical conditions. He sees bullish momentum intact above the moving averages, yet considers the cluster of overbought indicator readings as a caution flag. The analyst remains alert for signs of a potential correction within the defined range. "Base case is sideways to higher within the R$5.5881–R$5.6475 band, but I stay cautious given the crowded long side and risk of short-term pullback."

Earlier, analysts noted that USD/BRL was supported by strong bullish momentum and sustained uptrend signals across major technical indicators. The current analysis builds on this view by highlighting the risk of a short-term correction amid unanimously overbought oscillator readings, making volatility around the R$5.6475 resistance a key focus for traders in the near term.

Source of Data: USD 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.