The Olympic-Sized Dive In The Brazilian Economy
Today’s Spotlight Market
What a difference a decade makes. BRIC (Brazil, Russia, India, and China) was the acronym of choice and investors flocked to emerging markets. Brazil saw growth of 4.0% in 2006, 6.1% in 2007 and ended the decade with growth of 7.5% in 2010, even after the global financial crises. The Brazilian Real also has plummeted, the Real traded in the .63000 range as recently as 2008, and now it struggles to reach the .30000 level.
Fundamentals
As Brazil anticipates the 2016 Olympic Games, there is a considerable degree of political and economic turmoil. A massive protest on March 13 against President Dilma Rousseff added to pressure for the Brazilian government to impeach the President. Economically, the worldwide drop in commodity prices has stung the Brazilian economy. Inflation is over 10%, unemployment is around 7.6%, the country has been in recession since 2015, and the International Monetary Fund projects a negative growth rate of 3.5% for 2016. The coinciding of a political crisis with an economic crisis also may reduce the likelihood of additional foreign investment, even with the country being in the spotlight during August for the Summer Olympics.
Technical Notes? -? View Today’s Chart
Turning to the 6-month continuation chart, we see some very choppy trading, but some potential short-term bullish signs as well. The 20-day Simple Moving Average (SMA) is providing short-term support as the Real continues to trade above the SMA. The curve of the 20-day SMA is becoming more steep and diverging from the 50-day SMA. 14-day RSI is bullish, mildly overbought at 71.92. Support can be found around .24000 at the mid-January lows, while .28000 is the next resistance level.
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