USD/BRL’s early October bounce lost steam after it couldn’t break above the 50-day moving average of 5.37/5.40. This pause indicates a lack of steady upward movement, with the pair now testing the September low of 5.27. While there might be a small rebound, the pair’s difficulty in surpassing last week’s high of around 5.37/5.40 could lead to further decline. Next target levels are expected at 5.20/5.17 and 5.10.

USD/BRL Shows Weakness

The USD/BRL pair is revealing some weakness following its early October rebound. It has struggled to stay above the 50-day moving average, which is near the 5.37/5.40 mark. Currently, it is re-testing the important support level of 5.27, the low from September. This technical weakness aligns with the fundamentals. Brazil’s central bank has kept the Selic interest rate at 10.50% to fight inflation, which recently fell to a 12-month low of 3.8% in October 2025. This high interest rate makes the Brazilian Real appealing for carry trades. The difficulty for USD/BRL to rise suggests growing downward pressure. For traders, this situation hints at strategies that could benefit from a declining USD/BRL. This might include buying put options with strike prices around the next support levels of 5.20 and 5.17. Additionally, selling call option spreads above the 5.37/5.40 resistance could be a smart way to earn premium while anticipating limited upward movement. Further supporting the Real, major Brazilian exports like iron ore and soybeans have stabilized in the fourth quarter of 2025, enhancing Brazil’s trade balance. The country’s trade surplus widened to $9.1 billion last month, exceeding market forecasts. This creates a solid foundation for a stronger currency.

A Potential Breakout or Breakdown

A brief bounce is possible, so traders should closely monitor the 5.37/5.40 level. If the pair cannot break above this resistance again, it would confirm the bearish trend and raise the chance of a continued decline. A clear close below the 5.27 support would trigger new short positions. Looking back, a similar situation occurred in the second quarter of 2024, where a failure to surpass the 50-day moving average preceded a rapid 4% drop in the pair in the following weeks. Implied volatility in USD/BRL options has increased slightly, indicating the market anticipates a movement. This highlights the importance of managing risk on any new positions. Create your live VT Markets account and start trading now.

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