BRL: Short-Term Gains In Sight

After taking a heavy beating against a host of currencies in recent weeks, the Brazilian real looks set for some near-term retracement as selling pressure on the unit seems to be taking a time out. Indeed, we see moderate short-term upside potential for the unit, as momentum indicators such as the relative strength index (RSI) remain in oversold territory. Nevertheless, we highlight that our near-term view for the currency is largely underpinned by the severity of the real's sell-off since mid-January, rather than signalling a prolonged rally. As such, we believe that upside momentum for the real will be short lived.

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