Upon opening yesterday after the long Christmas weekend, the USD/BRL continued to track downward. The currency pair closed Tuesday’s trading near the 4.8130 depth, after touching a low around the 4.8475 value. Intriguingly yesterday’s open started with a sizeable gap lower which demonstrated that bearish sentiment remains rather intense in the USD/BRL. Traders have expressed more risk appetite globally, based on the notion the USD has developed a weaker outlook because of the change in rhetoric from the Federal Reserve and lower than anticipated U.S inflation data.
Speculators of the USD/BRL need to acknowledge that holiday trading volumes are low and while the trend lower may look attractive, sudden volatility could develop. Many financial institutions will remain on the sidelines until the New Year’s holiday has concluded; this is because their biggest clients are also on holiday.
USD/BRL 4.8000 Ratio Likely in Technical Sights as a Target
Speculators will now need to look at six-month charts to try and contemplate the potential direction of the USD/BRL. Yes, perspective can also be gained by looking at short-term charts, but because the USD/BRL is challenging prices not seen since August of this year, traders who feel attracted to the potential of the currency pair moving towards the 4.8000 juncture will benefit from the mid-term approach.
The 4.8000 mark while attractive may remain rather overly ambitious in the short term, particularly during the holiday season. The USD/BRL does have a solid history of opening its trading with significant gaps; this morning’s price action in the currency pair should be watched. Another bolt lower this morning from the USD/BRL would be curious. Having closed at session lows yesterday the USD/BRL merits close attention today. Perhaps lingering bearish sentiment will be seen early today, but because holiday trading volumes are light there is reason to suspect today’s opening will be more polite.
USD/BRL Downside Potential and Perspective Near-Term
- The weaker USD outlook which has developed among financial institutions and has been acted upon and may continue to be a factor, but light trading volumes for the remainder of this week may start to cause headwinds.
- Day traders also need to remember that reversals higher can and will happen in the USD/BRL, one-way directions in Forex do not exist due to normal price action.
- Traders with too much leverage can be hurt by the smallest of value changes in the USD/BRL.
Brazilian Real Short-Term Outlook:
Current Resistance: 4.8210
Current Support: 4.8090
High Target: 4.8380
Low Target: 4.7940
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