- On last Tuesday the USD/BRL climbed to a high above the 5.0500 mark briefly, this tested values not seen since late October in 2023.
- The price of the USD/BRL did reverse off the highs produced on Tuesday and early Wednesday, moving to a low of nearly 4.9500 on Thursday.
- Yet another round of reflexive results in Forex was produced globally, and the USD/BRL reacted with a buying surge on Friday.
Having gone into last weekend sustaining values above the 5.0000 was noteworthy, but yesterday’s trading managed to produce some selling which has brought the USD/BRL back a price range which has dominated the past month. In fact the current price of the USD/BRL is now near values that were seen two months ago. The broad Forex market has been choppy for a while and the USD/BRL is trading in a healthy manner. Yesterday’s close around the 4.9733 ratio done calmly.
Lack of Fed Clarity and Mixed U.S Data
While financial institutions certainly geared for a weaker USD in December of 2023, this based on the Federal Reserve’s rhetoric in the middle of that month about becoming more dovish, monetary policy has not effectively changed. Mixed U.S data led by stubborn inflation has put the U.S Fed in an uncomfortable spot and while they are not saying they were wrong, the U.S central bank seems to have walked back from its overly ambitious goal of cutting interest rates a handful of times in 2024. Two to three interest rate cuts this year seem like the realistic goal for the moment.
The USD/BRL has reacted in line with many other major currency pairs as Forex has produced a steady stream of nervous results which have essentially led to sideways price action. Yes, there have certainly been fluctuations as financial institutions have wagered on the daily outcomes and mid-term outlooks provided by U.S economic data, but the price of the USD/BRL is testing values seen two months ago. Day traders can find opportunities, but they need to use their risk taking tactics carefully. USD/BRL speculators also need to be vigilant for gaps which happen when the currency pair opens for trading on a daily basis.
Short-Term Dynamics and More USD/BRL Nervousness to Come
The U.S will release a host of important economic reports this week, today a Consumer Confidence reading will be released. On Thursday GDP reports and the weekly Unemployment statistics will be brought forth. Nervous sentiment lingers within financial institutions as they react to the economic data from the U.S.
- The question is if current resistance which was tested recently will continue to hold, the fact the USD/BRL went to a high around 5.0525 briefly on Tuesday of last week is troubling.
- Traders should remain cautious in the USD/BRL and use realistic targets. The currency pair could react to stronger U.S data this week with buying, but weaker U.S statistics would likely cause selling of the USD/BRL.
Brazilian Real Short Term Outlook:
Current Resistance: 4.9820
Current Support: 4.9695
High Target: 5.0030
Low Target: 4.9610
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