Brazilian stocks and the currency are in a strong bull run this year. The Ibovespa Index, which tracks the biggest companies in Brazil, rose to a record high of BRL 190,000, up sharply from the pandemic-low of BRL 95,130. It has risen in the last six consecutive weeks and is up by 17% this year.
At the same time, the Brazilian real (BRL) has continued soaring, with the USD/BRL falling to 5.1795, its lowest level since May 2024.
Brazilian government bonds are also doing well, with the ten-year yield has pulled back to 13.58% from last year’s high of 15.5%.
Ibovespa Index and Brazilian real jumps amid foreign buying
Brazilian stocks, bonds, and the local currency are in a strong bull run, helped by the ongoing accumulation by local and foreign investments.
A recent report showed that foreign investors bought Brazilian stocks worth over $2.1 billion into local equities between January 1 and January 21, a figure that has likely jumped.
The surge happened as investors continued buying emerging market assets, with Brazil offering discounted valuation multiples, liquidity, and more competitive interest rates.
Brazilian stocks have also soared as investors predicted that the central bank will cut interest rates in the upcoming meeting in March. It has left interest at historic highs for months, with most analysts predicting more cuts in the March 18 meeting. A Bloomberg analyst predicted that it will cut by 50 basis points to 14.50%, even after inflation rose slightly in January.
The elevated Brazilian interest rates have made it a good carry trade currency. A carry trade happens when investors borrow from a low-interest-rate currency, like the United States, and invest in a high-interest-rate country like Brazil.
Additionally, the IBOVESPA Index has done well as Brazil became a major beneficiary of the ongoing conflict between the United States and China. China has continued buying most of Brazil’s products like corn and soybeans, with the most recent data showing that the bilateral trade volume between the two countries jumped to a record high of over $171 billion last year.
Brazil exported goods worth over $100 billion to China last year, while China sold goods worth over $70 billion to Brazil in the same period. This trend will likely continue in the foreseeable future as tensions between the US and China will likely continue in the future.
USD/BRL technical analysis
The weekly timeframe chart shows that the USD/BRL exchange rate has been in a strong downward trend in the past few months. It has crashed from a high of 6.3065 in December 2024 to the current 5.20.
The pair has moved below the 61.8% Fibonacci Retracement level at 5.2458. This price aligned with the lowest swing in September 2025 and November.
The 50-week and 100-week Exponential Moving Averages (EMA) have made a bearish crossover, which is commonly known as a mini death cross. It also formed a head-and-shoulders pattern, a common bearish reversal sign.
Therefore, the most likely scenario is where the pair continues falling, with the next key target being at 5, which is about 3.40% below the current level. A move above the key resistance level at 5.2642 will invalidate the bearish outlook.
Ibovespa Index technical analysis
The weekly timeframe chart shows that the Ibovespa Index has been in a strong uptrend in the past few months. It has jumped in the past six consecutive weeks and is much higher than all moving averages.
The Relative Strength Index (RSI) has jumped to the extreme overbought level of 85, while the Stochastic Oscillator has jumped to 90.
Therefore, while the index may have some more upside, there is a risk that it will pull back, potentially to the psychological level at BRL 180,000 in the near term.
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