The USD/BRL has traded within a lower price range since last Wednesday; this after financial institutions reacted to U.S Federal Reserve interest rate policy rhetoric.
The USD/BRL went into the weekend near the 5.2190 ratio, which was a solid bearish result considering the currency pair essentially opened near 5.3600 early last week. Traders should be prepared for the typical early gap when the USD/BRL opens today following the weekend. Price action could prove intriguing after last week’s rather unforeseen – by me - strong selloff within the USD/BRL.
On Wednesday of last week, the USD/BRL seemingly was trading within rather calm waters without much volatility between the 5.2800 and 5.3100 values. However, upon the speech given by U.S Fed Chairman Powell that the U.S central bank would likely pursue a less aggressive interest rate policy, the USD weakened across the board in Forex including against the Brazilian Real.
USD/BRL for the Moment has a Lower Short Term Price Range
The USD/BRL, having proved it has the ability to still sell off last week, was able to maintain its lower price range before going into the weekend. On Thursday and Friday, the USD/BRL was able to test the 5.1600 ratios lower before fluttering higher, however, Friday’s high of nearly 5.2400 was not remarkably strong.
The ability of the USD/BRL being able to go into the weekend with its lower price value intact is noteworthy. The question for speculators who may have a bullish technical leaning regarding the USD/BRL is if this value is suspicious enough to pursue buying wagers.
USD/BRL Opening may Offer Clues about Behavioral Sentiment
One of the key ingredients to being a successful trader is to acknowledge wrong decisions and not let them become costly errors of judgment. The USD/BRL certainly traded lower last week and today’s opening may produce evidence regarding where short-term sentiment remains. If the USD/BRL is able to sustain a lower price range and in fact demonstrates more selling pressure this would be noteworthy, and short-term consideration would have to be given to the potential of more downside action.
- If the USD/BRL were to sink below 5.2000 and show an ability to maintain this price, short-term speculators may be inclined to seek quick-hitting price action that re-tests lows seen last week. Solid risk management is urged.
- Bullish traders who feel the USD/BRL is oversold due to fundamental reasons regarding Brazil’s fiscal policy should be careful, the selloff last week should be given respect in the short term.
- Buying on technical support levels and looking for upside movement may be the right choice, but it may prove dangerous.
Brazilian Real Short-Term Outlook:
Current Resistance: 5.2310
Current Support: 5.2040
High Target: 5.2710
Low Target: 5.1790
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