On Tuesday of last week following the New Year holiday, the USD/BRL traded near a high of 5.4800. However upon opening for trading on Wednesday the 4th of January, and with more volume creeping into Forex the USD/BRL started to trade lower. On Friday of last week, the USD/BRL essentially opened near the 5.3000 ratios and after important U.S inflation data came in under expectations via U.S Hourly Earnings the currency pair essentially fell to a low of about 5.2220 before going into the weekend.
If worries about Brazilian fiscal policy meshed with the unclear U.S Federal Reserve policy were not enough to make speculators of the USD/BRL think the currency pair’s outlook was complex, weekend political rioting in Brazil has now been added to the mix. However, the robust and often unlawful demonstrations by the ex-President’s supporters this weekend have been stopped for the moment.
Yesterday’s trading in the USD/BRL didn’t suffer a massive reversal higher, this after following the weekend’ violence which was contained. Any nervousness regarding the political situation in Brazil seems for the time being to have been eased. The USD/BRL finished yesterday’s trading near the 5.2550 ratio which is rather remarkable.
A Calm USD/BRL is Important for Brazil and Speculators
While volatility in Forex is often welcomed by traders, political violence if not contained can cause costly losses for speculators if they are on the wrong side of a trade, and thankfully the USD/BRL has responded well. The currency pair is likely to open trading today within relatively calm waters and traders may be looking at the lower depths the USD/BRL traded around on Friday as a target, but that may prove overly ambitious.
- The U.S. will release important inflation data this Thursday which will affect the USD/BRL via Consumer Price Index figures.
- If the USD/BRL remains near its current price level and the inflation data from the U.S. is weaker than expected this could ignite more short-term selling.
USD/BRL will remain Dynamic and Speculative for Wagering
Traders in the USD/BRL should certainly not rest easily; the currency pair will remain dynamic in the coming days. Not only are political shadows hovering over Brazil which will likely remain stormy, but the USD/BRL has traded lower and is testing key support within the lower part of its one-month price range. Important U.S inflation numbers this Thursday will throw additional dynamic ingredients into the trading sphere and will certainly test the perspectives of short-term speculators. A solid reversal higher would not be a gigantic surprise if financial houses feel the selloff has been too strong.
Solid risk management is advised. While support ratios may look tempting as targets, traders should be ready for the potential of choppy conditions. Quick-hitting price goals with narrow take-profit ratios being aimed for may prove to be the best wagering method for day traders who can use slightly wider stop losses and very conservative leverage.
Brazilian Real Short-Term Outlook:
Current Resistance: 5.2695
Current Support: 5.2450
High Target: 5.3380
Low Target: 5.2090
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