In 2022, commodity prices continue to rise because of many factors. The recent upward trajectory of the real has a cause-and-effect impact on inflation. Higher commodity prices support Brazil’s currency, and a rising real only pits more upward pressure on raw material prices.” On February 24, the real was at the $0.19515 level against the US dollar. Since then, the Brazilian currency has made higher lows and higher highs, even though the US dollar exploded to its highest level in two decades.
Inflation that pushes raw material prices higher will likely continue to push the real high over the coming months. The Brazilian real is a commodity currency as the Brazilian economy thrives during raw material bull markets.
Global inflation is bullish for Brazil’s currency, given the country’s raw material production. In 2022, the US Federal Reserve has become vigilant in its quest to address inflationary pressures after a series of consumer and producer price index data that shows the economic condition is at the highest level in over four decades.
While the Fed can address the inflationary roots of seeds planted in 2020 when liquidity, historically low-interest rates, and government stimulus programs caused the economic condition, events in 2022 present a unique challenge. Russia’s invasion of Ukraine, sanctions on Russia, and Russian retaliation have caused distortions in food, energy, and other raw material prices.
While central bank monetary policy tools address the economy’s demand-side, supply-side issues caused by the first major war in Europe and geopolitical tensions are another story. The Fed and other central banks are not equipped with tools that address the supply side.
Sanctions on Russia enhance Brazil’s position as a commodity supermarket to the world- An election is on the horizon
Brazil is one of the BRIC countries, along with Russia, India, and China. The position has caused the Brazilian government to take a neutral stance on sanctions and other issues surrounding Russian aggression. Moreover, China and Russia’s “no-limits” agreement has caused Brazil and India to avoid backing the US and Europe or China and Russia in the global conflict. However, Brazil’s vast commodity product creates an opportunity to benefit from rising raw material prices and supply areas of the world where political export or import bans exist.
In October, Brazilians will go to the voting booths to decide if far-right-wing and controversial President Jair Bolsonaro will serve another term leading South America’s leading economy. The election could cause lots of volatility in the real versus the dollar foreign currency relationship.
Levels to watch in the Brazilian real versus the US dollar currency relationship
Bull markets rarely move in straight lines, and the upcoming Brazilian Presidential contest could cause lots of price variance in the real over the coming months. However, the global inflationary pressures will continue to support Brazil’s commodity production, leading to higher corporate profits and government tax revenues.
Brazil is a significant commodity producer and exporter, and Russia’s issues only make the global dependence on Brazilian exports more substantial. We can expect the bullish trend to continue with the bull market in the commodities asset class.
BRL/USD Long (Buy) Enter at: 0.2091 T.P_1: 0.2195 T.P_2: 0.2376 T.P_3: 0.2512 T.P_4: 0.2700 S.L: 0.1750
All information on this website is of a general nature. The information is not adapted to conditions that are specific to your person or entity. The information provided can not be considered as personal, professional or legal advice or investment advice to the user.
This website and all information is intended for educational purposes only and does not give financial advice. Signal Factory is not a service to provide legal and financial advice; any information provided here is only the personal opinion of the author (not advice or financial advice in any sense, and in the sense of any act, ordinance or law of any country) and must not be used for financial activities. Signal Factory does not offer, operate or provide financial, brokerage, commercial or investment services and is not a financial advisor. Rather, Signal Factory is an educational site and a platform for exchanging Forex information. Whenever information is disclosed, whether express or implied, about profit or revenue, it is not a guarantee. No method or trading system ensures that it will generate a profit, so always remember that trade can lead to a loss. Trading responsibility, whether resulting in profits or losses, is yours and you must agree not to hold Signal Factory or other information providers that are responsible in any way whatsoever. The use of the system means that the user accepts Disclaimer and Terms of Use.
Signal Factory is not represented as a registered investment consultant or brokerage dealer nor offers to buy or sell any of the financial instruments mentioned in the service offered.
While Signal Factory believes that the content provided is accurate, there are no explicit or implied warranties of accuracy. The information provided is believed to be reliable; Signal Factory does not guarantee the accuracy or completeness of the information provided. Third parties refer to Signal Factory to provide technology and information if a third party fails, and then there is a risk that the information may be delayed or not delivered at all.
All information and comments contained on this website, including but not limited to, opinions, analyzes, news, prices, research, and general, do not constitute investment advice or an invitation to buy or sell any type of instrument. Signal Factory assumes no responsibility for any loss or damage that may result, directly or indirectly, from the use or dependence on such information.
All information contained on this web site is a personal opinion or belief of the author. None of these data is a recommendation or financial advice in any sense, also within the meaning of any commercial act or law. Writers, publishers and affiliates of Signal Factory are not responsible for your trading in any way.
The information and opinions contained in the site are provided for information only and for educational reasons, should never be considered as direct or indirect advice to open a trading account and / or invest money in Forex trading with any Forex company . Signal Factory assumes no responsibility for any decisions taken by the user to create a merchant account with any of the brokers listed on this website. Anyone who decides to set up a merchant account or use the services, free of charge or paid, to any of the Forex companies mentioned on this website, bears full responsibility for their actions.
Any institution that offers a service and is listed on this website, including forex brokers, financial companies and other institutions, is present only for informational purposes. All ratings, ratings, banners, reviews, or other information found for any of the above-mentioned institutions are provided in a strictly objective manner and according to the best possible reflection of the materials on the official website of the company.
Forex trading is potentially high risk and may not be suitable for all investors. The high level of leverage can work both for and against merchants. Before each Forex investment, you should carefully consider your goals, past experience and risk level. The opinions and data contained on this site should not be considered as suggestions or advice for the sale or purchase of currency or other instruments. Past results do not show or guarantee future results.
Neither Signal Factory nor its affiliates ensure the accuracy of the content provided on this Site. You explicitly agree that viewing, visiting or using this website is at your own risk.
