TD Securities reports that the Brazilian Real (BRL) is experiencing sustained pressure against the US Dollar (USD) due to elevated election-related risks. Over the past month, the USD/BRL currency pair has tested its 200-day simple moving average (SMA) resistance, signaling ongoing market concerns about Brazil's fiscal outlook as the country approaches its election cycle [1].
The analysis draws a parallel between current market conditions and those of 2014, noting that USD/BRL price actions in 2026 have shown more than a 70% correlation with 2014. In that year, the currency began to rally in September amid market apprehension regarding then-President Dilma Rousseff's fiscal policy stance [1].
TD Securities highlights that President Lula continues to lead in most polls, and his perceived reluctance toward fiscal consolidation could further pressure the BRL in the coming months. As a result, the bank does not recommend holding BRL for carry trades in the near term and maintains its forecast of 5.30 for USD/BRL in the second half of 2026. The firm suggests that more attractive entry points for shorting USD/BRL may emerge in the coming months, rather than at present levels [1].
Overall, TD Securities' outlook indicates that the domestic election cycle is likely to keep the BRL under pressure, with technical resistance and historical analogs pointing toward increased volatility. The preference is to avoid BRL carry positions and to wait for more favorable entry levels for USD/BRL shorts [1].
CONCLUSION
TD Securities maintains a cautious stance on the Brazilian Real, citing election risks and fiscal concerns as key factors keeping the currency under pressure. The bank's forecast for USD/BRL remains at 5.30 for H2 2026, with a recommendation to avoid BRL carry trades in the near term. Market participants are advised to wait for better entry points before considering USD/BRL shorts.