Last Wednesday the 31st of May the USD/BRL was touching a high of nearly 5.1290, a value that had last been seen late in March of this year. A little more than one week later, the USD/BRL is near the 4.9235 ratios as of this writing. Last week’s rhetoric from two U.S Federal Reserve officials regarding their belief the Fed should not raise interest rates on the 14th of June seems to have created a lot of downward momentum in the USD/BRL. Having said, this it should be noted in the short-term – yesterday’s trading – the USD/BRL incrementally moved higher technically.
Strong Lower Realms of the USD/BRL Demonstrated the Past Couple of Months
This is not the first time the USD/BRL has traversed close to the 4.9000 level in the past couple of months. In the middle of April and May the currency pair showed the ability to battle near this price and was pushed upwards slightly on both occasions, a little like yesterday’s price action.
The high made last week and its reversal lower shows the strength of the Brazilian Real remains firm. Financial institutions are not only indicating confidence regarding the potential of a more dovish U.S. Federal Reserve, but they are showing some belief in the fiscal policy of the current Brazilian government and the economy too.
Long Term Chart Consideration may be needed for the USD/BRL
- Day traders of the USD/BRL will need to look at longer term charts to consider the potential of lower values in the currency pair.
- The support realms of 4.9200 to 4.9000 have proven durable the past couple of months, the last time the USD/BRL traded below this level in a sustained manner was in March to June of 2022.
- Traders should not get overly ambitious in the USD/BRL regarding bearish moves in the short and near-term, because the decision of the U.S Federal Reserve next week remains unclear.
While the 4.9100 to 4.9000 levels may look like attractive wagers for downside price action in the short term, traders should not get overconfident about values below these ratios quite yet. While financial institutions may believe the Federal Reserve could halt its aggressive interest rate policy in June and actually not increase the Federal Funds Rate, there are no guarantees this will happen and speculators should keep their price targets realistic.
The remainder of the week and perhaps early next week could see choppy conditions prevail. Until the U.S. Federal Reserve makes its interest rate policy decision official on the 14th of June, betting on strong downside action will carry definite risks. Small reversals higher in the short-term could attract wagers in the USD/BRL too, by traders who believe support is durable.
Brazilian Real Short-Term Outlook:
Current Resistance: 4.9365
Current Support: 4.9250
High Target: 4.9550
Low Target: 4.9020
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