Brazilian Election Trading Manual: How We Predicted This Round's Surge

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地平线全球策略2026/10/06 09:38

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Brazilian Election Trading Manual: How We Predicted This Round's Surge image 0

The Brazilian market has, as expected, experienced greater volatility, in line with the path we projected in ARI's WEEKLY WRAP two weeks ago. This article includes excerpts from weekly content over the past few weeks.

Currently, Brazilian voters remain divided into two major camps, with the poll margin within the margin of error. However, there is a lack of enthusiasm for both Lula and challenger Flavio, and other candidates find it hard to close the gap. This sense of fatigue is strikingly different from the strong anti-establishment sentiment triggered by the severe recession and Dilma Rousseff's impeachment in 2018, and the high level of engagement during the 2022 contest over pandemic management and the future of democracy.

This is reflected in market positioning as similar “balanced” pricing—in other words, prices are unlikely to develop a clear trend. In contrast to recent more ideologically polarized and potentially direction-changing elections in Peru and Colombia, Brazil’s basic structure is likely to remain unchanged regardless of who wins.

However, if Flavio wins, the upside bias would be greater and the rate cuts could reach 200 to 300 basis points.

We are always ready to adjust our views.

The first round of the election is on October 4, with a possible runoff on October 25, followed by fiscal policy decisions—these are the key drivers for the exchange rate. After the first rounds in 2014 and 2022, the USDBRL fell, but completely reversed before the runoff; in 2018, the real was strongest on the Friday before the second round. Therefore, the first round can cause major exchange rate volatility, but it may not last; the market will shift quickly, and we must also be ready to reposition rapidly and align ourselves with the winner.

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IBXX (Daily chart, as of 261006)
Flavio is leading in the first round of the election, and the market is moving exactly in line with the fundamental outlook we laid out two weeks ago.
I had emphasized that the October 5 election would trigger substantial volatility after a prolonged period of balance. Our EWZ bet is up 16%, while USDBRL fell after the Bear Trigger and entered the downward-sloping Ariston Channel.

Brazilian Election Trading Manual: How We Predicted This Round's Surge image 2

USDBRL (Daily chart, as of 261006)

Brazilian Election Trading Manual: How We Predicted This Round's Surge image 3

EWZ (Daily chart, as of 261006)

You need to do your homework in advance to stay grounded as conditions change. Charts alone are not enough; every decision must draw on all three systems.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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