Speculators who like to pursue the USD/BRL will have intriguing decisions to make based on technical factors early today and into tomorrow.
The USD/BRL went into the weekend near the 5.0950 level which is a rather impressive result considering the currency pair was trading near the 5.2750 realms to start the week. The USD/BRL has maintained its bearish trend since the government decisively dealt with political unrest which threatened to escalate. Financial houses may not agree with the current fiscal policy of the Brazilian government, but they do like political clarity and stability.
On Thursday of last week, the USD/BRL was trading near the 5.1720 ratio after experiencing natural cyclical price action which produced an incremental decline in the currency pair. Then upon the publication of the U.S inflation data via the Consumer Price Index statistics, the USD/BRL mirrored the broad Forex market and the currency pair continued to sell off, but in a quicker fashion.
Thursday’s low nearly touched the 5.0740 level during the frenzied selling, but then the USD/BRL did begin to reverse higher. And this is where it gets intriguing for speculators, the high attained on Friday for the USD/BRL was near the 5.1550 ratios and then selling began to build again and the currency pair went into the weekend near the 5.0950 mark. What is interesting about the low in the USD/BRL on Friday near 5.0770 is that it didn’t break Thursday’s lower value.
The Opening of the USD/BRL should be Watched Closely
After the rather strong selloff of the USD on Thursday and parts of Friday last week, there seems to have been a slight reversal higher across the broad Forex market early Monday. Speculators need to ask if this is a natural short-term reaction that is producing upwards momentum in the USD because financial houses think it was oversold, and a reaction that will fade.
- Traders as always should expect a potential volatile gap upon the opening of the USD/BRL following the weekend, particularly because bearish momentum was rather strong at the end of last week.
- The 5.0830 ratios should be watched, if this support level is proven vulnerable it may mean additional selling action will build in the USD/BRL near-term. However, traders need to be ready for volatility.
Support Levels must be Given Attention
If support comes under pressure the 5.0750 level could prove critical, if this mark falters an additional gust of selling could test mid-term lows near the 5.0500 to 5.0400 marks. However, upon the opening today the likelihood of some early buying would not be a surprise in the USD/BRL. If resistance proves strong near the 5.1150 to 5.1350 levels this could be a spot bearish traders may want to ignite selling positions. But if the 5.1560 ratios is broken higher the USD/BRL could then retest the 5.1800 to 5.2000 values in the near term.
Brazilian Real Short-Term Outlook:
Current Resistance: 5.1140
Current Support: 5.0810
High Target: 5.1710
Low Target: 5.0350
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