The Brazilian real weakened sharply against the U.S. dollar after US President Trump announced 50% tariffs on Brazilian exports, effective 1 August.
In response, Brazilian President Luiz Inacio Lula da Silva announced Brazil would retaliate with the same rate on U.S. imports. Trump has already pledged to retaliate if Brazil retaliates.
USD/BRL rallied from just under 5.44 to a high near 5.63. On the 1-hour chart, the pair is now retracing but perhaps consolidating in a narrow range between the 61.8% and 38.2% Fibonacci zones.
With tariffs set to begin in under a month and both sides not ready to back down, USD/BRL remains sensitive.
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