A historic turning point in Brazil’s presidential election
In Brazil’s presidential election, Lula achieved something no one had managed in nearly four decades: he overturned a first-round defeat to win the runoff and he will become president for a fourth term. However, market participants had priced in a victory for Flávio Bolsonaro and, with it, the prospect of a fiscal turnaround. Lula’s win therefore triggered a significant correction in the Brazilian stock market. Lula will face a difficult balancing act between market participants demanding fiscal consolidation, voters expecting him to deliver on his campaign promises, and an increasingly right-leaning Congress where governing will require political compromise. Although Brazilian equities remain attractively valued, post-election uncertainty may keep Brazilian assets under pressure in the short term.
Commodities - Technical Analysis
There has been no change in the downward trend for gold and silver, but selling pressure is easing for both precious metals. As long as the trend lines driving the decline remain intact, a sustained reversal cannot be expected. The price of oil has broken through the 100 level, and the trend remains upward for now. Natural gas may correct higher following a sharp price decline. Copper, trading within a wider range, may be approaching the upper end of that range. After sharp declines, wheat and corn prices may have reached key levels where the likelihood of a reversal is increasing.
A few weeks ago, the dollar pulled back from key levels against both the euro and the pound. Exchange rates fell as the dollar strengthened, but it is more likely that we will see a higher low. The forint has begun to weaken, though it may still have some room to rise against its major counterparts. The USDJPY exchange rate continued to correct higher following a strong intervention, but the nature of this move does not suggest new highs. A strong day of yen buying could even lead to a short position in this pair. The EURCHF exchange rate, on the other hand, may be undergoing a structural shift, so looking for long positions could be a good strategy in the coming weeks.
EURUSD
EURUSD
The dollar has regained strength in recent days and is already threatening the uptrend. A close below 1.1593 could open up further downside potential. 1.1475 could serve as a support level that must hold if traders are to look for long positions again later. The natural level at 1.1719 is an important resistance; a break above it would open the door to further upside. In that case, even this year’s high around 1.2085 could come into play. For now, it’s worth waiting for a higher low to form.
The strengthening of the dollar threatens the upward trend here as well. A break below 1.3550 could push the exchange rate down to the 1.3428 level. Above that, resistance lies at the 1.3672 level; a break above this could open up further upside potential, but for now, the likely goal is to form a higher low.
Given the sharp reversal from the 359.4 level and the new swing high reached over the past few weeks, the price could even reach the 375 level. On the downside, the 359.4 level should not be breached; this could be the dividing line between the long and short sides.
Three days ago, the exchange rate broke through the downtrend line, thereby changing the downward pattern; the curve is now beginning to rise. The 312.5 level may now serve as support, and the 328.1 area may also be within reach.
Since the intervention seen in the final days of July, only a correction of the decline has been observed. If it fails to reach a new high and a strong bearish candle reappears below 162.5, that could be enough to trigger short positions. Strong support lies around the 150 level; a significant decline is unlikely until it breaks through the thin green trendline.
The rapid return above the downtrend line indicates that a structural shift may be on the horizon. The next minor pullback should not close below 0.9338, as this support level could serve as the dividing line between long and short positions. There could be more upside potential, so looking for long positions may be the better choice as long as the price remains above the aforementioned level. 0.9521 is an important resistance level—it may still be reached—but in the event of a sustained upward trend, the long-term target price could be around the key natural level of 0.9766.
