The USD/BRL has seen buying pressure mount following the Christmas holiday and values are now touching critical resistance levels since the New Year has begun.
The USD/BRL closed near the 5.4800 vicinities yesterday, and its climb higher has been rather steadfast since touching a low of nearly 5.1300 on the 23rd of December. Skeptics of the bullish trend may be quick to point out the aggressive bullish move has taken place during the holiday season and this is correct, but it may not hide the notion the USD/BRL is being bought because financial houses may be worried about the coming changes to Brazilian fiscal policy.
With full trading volumes ready to bounce back in the near term, now that the holiday season is ending and financial houses are returning to their trading desks, the USD/BRL will get a chance to reverse lower. The currency pair is traversing near important resistance and the 5.50000 realms can be viewed as a key psychological barometer. Although the USD/BRL did climb above this mark in November and July of 2022 briefly, the Forex pair has not seen sustained trading over the 5.5000 ratios since January of 2022.
Near-Term will be Important for USD/BRL Behavioral Sentiment
The next few days of trading in the USD/BRL could help set the tone for the months ahead. Fundamentally, the U.S. Federal Reserve will publish its Meeting Minutes today which will serve as a key element regarding behavioral sentiment regarding interest rate policy to come over the next half year.
Also, the change in government in Brazil is now official. The new President has access to push for changes to economic policies which are likely to be more liberal regarding spending for social causes that are viewed as justified by his political party. This will certainly cause concern about the Brazilian Real’s developing value over the long term.
A return of full trading volume will give traders perspective regarding the perspective of financial houses near-term. The recent run-up in value which has been rather aggressive over the past ten days will have to see a selling wave flourish to create the notion the USD/BRL has been overbought. If this does not happen and the higher price is sustained, this could lead to the suspicion the USD/BRL is about to embark on an extended bullish trend. Traders should be mindful that a gap upon the opening of USD/BRL Forex today is likely.
Support and Resistance Short-Term in the USD/BRL should be watched
- If the USD/BRL is suddenly traversing near the 5.4900 to 5.4990 ratios on the opening, this could mean the target of 5.5000 is clearly within the scope of speculative forces. A sustained move above 5.5000 would be a bullish sign.
- Support near the 5.4600 to 4.4500 areas should be monitored. If they are proven vulnerable easily, this could mean that the USD/BRL has been overbought the past week and the currency pair could challenge the 5.4100 ratios near-term.
Brazilian Real Short-Term Outlook:
Current Resistance: 5.4990
Current Support: 5.4510
High Target: 5.5660
Low Target: 5.4020
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