The USD/BRL went into the weekend near the 5.0135 level, but this occurred only after the USD/BRL suddenly produced a strong move downwards earlier on Friday and touched the 4.9300 vicinity. The rapid pace of price action in the USD/BRL certainly caught day traders unaware and likely caused some emotional outbursts as the currency pair dropped in value, but then began to reverse upwards and essentially closed slightly below highs seen during the week which consistently had run into rather strong resistance.
Last Friday’s burst of price velocity may be a sign of things to come for the USD/BRL in the coming days. The Central Bank of Brazil will make its interest rate announcement this coming Wednesday, in September of this year the Brazilian central bank cut interest rates to 12.75% in a rather surprising move. There has been chatter that another interest rate cut is desired by the Brazilian government, but this decision is not clear and there have been signs of inflation continuing to be a source of trouble in the nation.
USD/BRL Opening Today and Price Action
Traders always need to be mindful of the opening in the USD/BRL because it tends of have gaps, which on occasion can be rather wide. The price action of the USD/BRL until Wednesday’s central bank decision in Brazil will cause fragile conditions, traders should be cautious. It is also important to note the U.S Federal Reserve will also release its Federal Funds Rate this Wednesday. The combination of these two central bank reports occurring close to each other will add to potential speculative dynamics.
The past week of trading in the USD/BRL saw the currency pair hover near the 5.0000 ratio and it appears financial institutions have been rather comfortable with this exchange rate. Friday’s sudden burst of drama certainly caused speculators to get hurt if they were on the wrong side of the price velocity.
USD/BRL Stability as Central Banks Make News
- Traders looking to take advantage of the frequently tight price range in the USD/BRL need to make sure their risk management are in place, Friday’s price action is a solid example why it is necessary.
- Leading up to Wednesday, the USD/BRL may remain in a rather tight price range with some sudden sparks being ignited as financial institutions position before the Central Bank of Brazil and U.S Fed make their announcements.
- Wednesday’s price range in the USD/BRL is likely to widen significantly and traders who are cautious may want to simply monitor the currency pair until there is more clarity regarding Brazil’s interest rate decision.
Brazilian Real Short-Term Outlook:
Current Resistance: 5.02060
Current Support: 4.9940
High Target: 5.0450
Low Target: 4.9670
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