The USD/BRL will prove interesting upon its opening after Republic Day in Brazil was celebrated on Wednesday. Upon the lower Consumer Price Index data from the U.S. coming in weaker than anticipated on Tuesday, the USD/BRL sank to fresh lows and sustained them. The 4.8500 level was hit which created a low for the month and penetrated depths seen the week before on the 7th of November.
The opening for the USD/BRL should be watched closely today and traders should expect to see dynamic changes to value early. A gap in the first few moments of trading today should be anticipated. The USD did see some incremental strength develop in global Forex development late yesterday, which was likely a natural reaction among financial institutions that are repositioning after the weaker-than-expected U.S. inflation numbers. However, if the USD/BRL opens with only a slight gap upwards and then experiences sustained values near its short-term range, this may indicate potential selling momentum may develop again.
USD/BRL Lows Touched Late September Values
The lows demonstrated in the USD/BRL on Tuesday touched values last seen on the 20th of September. A look at 3 and 6-month charts shows the USD/BRL is within the lower elements of its price range again after the recent moves . On the 31st of October, the USD/BRL was trading near the 5.0580 mark. On the 5th of October the USD/BRL was around the 5.2200 vicinity.
The rather steady movement lower in the USD/BRL is evident even via one-month technical charts, but day traders need to understand the currency pair is not a one-way ride downward. The selling momentum in the USD/BRL which has been demonstrated does face reversals upwards. Speculators need to understand behavioral sentiment remains fragile, although there seem to be signs that risk appetite is increasing. Risk-taking in the USD/BRL should be done with solid tactics such as stopping loss and taking profit orders.
U.S. data today will be Overshadowed by Risk Taking Attitudes
- The 4.8600 should be monitored in the short-term. If this support level is penetrated and values remain below this mark it may be a signal additional selling can develop.
- Because of the lack of trading volume in the USD/BRL because of yesterday’s holiday, traders should be braced for a gap early today; they may want to wait to see directions which develop.
- Traders who want to pursue additional bearish momentum in the USD/BRL should use take profit orders and not target values which are too distant. The 4.8500 to 4.8300 range has shown significant support since early August.
- Looking for values below this mark may be understandable, but solid price velocity lower must develop.
Brazilian Real Short-Term Outlook:
Current Resistance: 4.8745
Current Support: 4.8590
High Target: 4.8810
Low Target: 4.8430
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