An Olympic Sized Downgrade
Today’s Spotlight Market
With Brazil set to host the Summer Olympics next year, the country is still reeling from the expense of the 2014 World Cup. Both political and economic strains have hurt the Brazilian Real. Fitch Ratings downgraded Brazil?s credit rating to BB+ from BBB-; this is effectively a ?junk? rating.
Fundamentals
Fitch cited continuing economic contraction as one of their reasons for the downgrade. The Brazilian economy contracted by 1.7% in the third quarter, and the forecast is for an annual grown rate of -3.7% for 2015 and -2.5% for 2016. Brazil is a commodity rich country, and the collapse in commodity prices has added to the economic stress. Continued political tension isn?t helping either. There are repeated protests calling for the impeachment of President Dilma Rousseff. With a rise in?? unemployment, inflation at 10%, political corruption and uncertainty, the Brazilian Real seems likely to continue to decline heading into 2016 and the Rio Olympics.
Technical Notes? – View Today’s Chart
Turning to the 6-month continuation chart, there are many bearish technical signs. 0.24000 is a support level established this fall, and the Real seems prepared to test that level again. The Real is also trading beneath both the 20- and 50-day Simple Moving Averages (SMAs.)? Both SMAs are converging around the .26250 level which is providing resistance. Finally, 14-day RSI is in bearish territory at an oversold 25.6263.
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