The USD/BRL has displayed an ability to track lower the past week and a half as it has correlated to the broad Forex market rather well, making it a speculative consideration.
The USD/BRL ended yesterday’s trading near 5.0735, as the currency pair continued to produce evidence that it is correlating to the broad Forex market rather well, making it rather intriguing from a speculative standpoint. While yesterday’s finish did not trade below the day’s low, nor did it challenge Monday’s depths, the USD/BRL has continued to show a tendency the past ten days to produce a consistently solid reversal lower after experiencing cyclical upwards price action.
Behavioral Sentiment may be Showing a Signal the USD/BRL will Move Lower
Monday’s low near the 5.0375 ratios came within sight of early February values when the USD/BRL was showing bearish momentum. Like most major currencies, however, in early February the USD/BRL began to reverse higher on fears the U.S Federal Reserve would remain stubbornly aggressive regarding its interest rate hikes. Choppy trading ensued in which rather volatile technical values were demonstrated on a regular basis. Volatility still has not disappeared.
The March 24th High in the USD/BRL is a Reminder of Potential Volatility
On Friday the 24th of March the USD/BRL climbed to nearly the 5.3400 mark, as the currency pair climbed from the previous day’s depth of nearly 5.2000. However, the week and a half of trading have seen the USD/BRL trade lower and if current resistance can be maintained in the near term it might signal another leg down could develop.
- Major risk events are ahead in the next couple of days.
- U.S. employment numbers will be published on Friday via the Non-Farm Employment Change statistics and the Average Hourly Earnings.
- The U.S jobs numbers will signal what U.S companies think regarding outlook via their hiring, and the inflation numbers via wages will indicate which direction inflation is moving.
- The notion that financial houses have taken the USD/BRL lower the past week and a half is a clear indication that some institutions think the U.S. economy is starting to slow and the U.S. Federal Reserve will have to become more dovish regarding monetary policy.
Traders should remain cautious. Speculators must acknowledge too, that trading volumes will become significantly lower after tomorrow because the Good Friday and Easter holidays are quickly approaching. The potential lack of trading volume in the already thin USD/BRL could leave the door open for a wave of volatility for the remainder of this week that might be violent.
If the USD/BRL is able to sustain the lower position of its current price range before the U.S. jobs numbers, traders may believe more selling could happen. Speculators looking for lower values are highly encouraged to use narrow take-profit orders to capture winnings and not be overly ambitious.
Brazilian Real Short-Term Outlook:
Current Resistance: 5.0990
Current Support: 5.0560
High Target: 5.1840
Low Target: 5.0040
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