China reduced US Treasury positions keeps US Dollar vs Brazilian Real steady

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US dollar vs real drops 0.63% today

Highlights

China's US Treasury holdings have dropped to an 18-year low, signaling persistent reserve diversification amid geopolitical risks.
Despite this adjustment, global foreign demand for US long-term securities remained solid in April, with net purchases reaching $103 billion.
USD/BRL faces sustained selling pressure, with price expected to consolidate between R$5.1029 and R$5.1757 as momentum signals diverge.

China’s Treasury divestment and global flows stir dollar uncertainty

China has reduced its holdings of US Treasuries to the lowest level in 18 years, reflecting an ongoing strategy to diversify its foreign reserves amid geopolitical tensions and questions about US Federal Reserve policy independence, according to Scmp. This large-scale adjustment by a major sovereign investor introduces uncertainty to US dollar flows, which can translate into downward pressure for USD/BRL as global reserve allocations shift. However, data from Tradingview noted that overall foreign purchases of US long-term securities reached $103 billion in April, with a net increase in overseas Treasury holdings, suggesting that global appetites for US debt remain, though price action has remained under broader selling pressure.

Oversold signals emerge as multi-layered resistance caps dollar recovery

USD/BRL is trading below the MA-20 but above the MA-50, while remaining under the MA-200, highlighting a layered technical structure. The Ichimoku Kijun on the daily chart stands at R$5.144 and serves as nearby resistance. MACD provides a strong buy signal, yet ADX and Bull/Bear Power both reflect dominant selling in the short term. The RSI is at 42, with both CCI and Stoch RSI residing in oversold territory, pointing to compressed downside momentum and limited evidence of a reversal so far.

Sideways trading expected as resistance and support define near-term risk

In the short term, USD/BRL is projected to fluctuate within a range of R$5.1029 to R$5.1757, based on typical recent volatility. The baseline scenario is for the pair to consolidate sideways inside this corridor. A move above the R$5.144 resistance could prompt a rally toward the upper end of the band, while a sustained break below R$5.1029 support might accelerate additional losses.

Anton Kharitonov, expert at Traders Union, notes that the reduction in China’s US Treasury holdings signals a fundamental shift in global reserve allocation which could undermine support for the US dollar. He observes that while technicals for USD/BRL are mixed, the prevailing sentiment is skewed toward further weakness, given persistent selling pressure despite some international demand for US securities. The analyst points out that the pair needs to reclaim R$5.144 to suggest upside, but risks remain tilted to the downside as long as short-term momentum stays negative. "Unless USD/BRL breaks above R$5.144, I see no reason to expect sustained recovery in the current backdrop."

Earlier, analysts noted that USD/BRL was demonstrating modestly bullish momentum but lacked conviction as it faced persistent long-term resistance. The current analysis introduces added downside risk tied to shifting global reserve allocations, making the ability of the pair to hold above R$5.1029 a critical indicator for near-term direction.

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.