The USD/BRL has produced a rather consolidated range the past week and a half of trading and has shown an ability to sustain it near-term higher values.
The USD/BRL ended yesterday’s trading near the 5.2930 mark and the currency pair demonstrated its rather tight equilibrium within its near-term range. Since the 12th of December when the USD/BRL gapped higher from a low of nearly 5.24000 on Friday the 9th and then opened near 5.3220, the currency pair has sustained its ‘loftier’ values. On the 1st of December, the USD/BRL was near the 5.1625 level.
On the 4th of November, the USD/BRL was around 5.0200 vicinities, which tested lows seen in late August. These values are highlighted to show the USD/BRL has not exactly mirrored the broad Forex market and that it has made an incremental and yes choppy climb higher. On the 17th of November, the USD/BRL traded momentarily near a high of 5.5300, which then did provide downside price action until the 1st of December.
Brazilian Fiscal Policy, U.S Federal Reserve, and the USD/BRL
The range of the USD/BRL has been interesting technically because it has been rather consolidated in many respects. The USD/BRL has not mirrored other major currency pairs as the USD has gotten weaker against many other major currencies. The trading of the USD/BRL has no doubt been affected by considerations regarding the new Brazilian government and its fiscal policy to come, U.S. Federal Reserve interest rates, and its rhetoric which is showing signs of becoming less aggressive.
Concerns about increased spending in Brazil have created concerns about a ‘weaker’ fiscal policy. Counterweighing this however is the perception the USD will not be as strong because the U.S. central bank is not going to hike interest rates in the same manner they have pursued the past year. This dynamic has led to choppy, but manageable trading conditions for speculators in the USD/BRL.
USD/BRL Technical Consideration as the Holiday Season Approaches
- Resistance within the USD/BRL has been consistently strong near the 5.4350 juncture since the first week of October, with an outlier occurring on the 17th of November during a strong buying spree.
- Support for the USD/BRL has been rather durable near the 5.1800 level since the start of December.
Speculators should expect a gap upon the opening of the USD/BRL today as always. Yesterday’s low of nearly 5.2900 is intriguing and if it continues to prove strong this might spark some USD/BRL buying looking for an upside. Traders should remember holiday trading will soon come into effect and this can cause sudden volatility. Buying the USD near perceived support levels may prove to be a worthwhile bet, but risk-taking tactics need to be realistic and quick-hitting short-term trades may prove to be the best decision. The USD/BRL is likely to see more choppy conditions in the coming days.
Brazilian Real Short-Term Outlook:
Current Resistance: 5.3150
Current Support: 5.2810
High Target: 5.3490
Low Target: 5.2450
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