USD/BRL Forecast: June 2020

Robert Petrucci

As media criticism of Brazilian President Jair Bolsonaro gets louder the Real has actually solidified.

In the wake of the coronavirus and what appears a mounting amount of criticism from domestic and international media outlets regarding the manner in which Brazilian President Jair Bolsonaro has handled the pandemic in his country, the Brazilian Real has shown an ability to gain in strength the past couple of weeks.

Perhaps it is a case of the US Dollar weakening against many of the major currencies in the forex markets as questions arises about the economic health of the United States, but another factor playing into the resilience of the Brazilian Real is the notion Brazil has not shut down its economy.

Coronavirus numbers have shown a staggeringly high degree of infection and death in Brazil, but the economy in many respects has not been shuttered. This has left the door open to the potential the Brazilian economy may not suffer as badly as many other nations economically. Vital industries have been allowed to keep working, its important commodities and manufacturing sectors have tried to maintain a level of normalcy.  

USD/BRL 3 month chart

The total human cost of the Coronavirus in Brazil may prove to be devastating

The population of Brazil has certainly felt the effects of the Coronavirus and statistically it has risen to the upper tier of nations which are suffering from the pandemic. The Brazilian Real due to a conservative economic approach had proven strong before the onset of the Coronavirus in the most populous South American nation.  The BRL had traded largely in a range of 3.800 to 4.200 against the US Dollar since August of 2019. Early in January of this year the BRL hovered near the 4.000 juncture. However, in mid-February when the Coronavirus outbreak started to scare international forex traders the BRL suddenly broke through the 4.250 support level and began to lose value until the second week of May when it reached an apex of weakness against the US Dollar with a value level near 5.900 which proved to be resistance.

The sudden turnaround for the Brazilian Real against the USD has only taken place the past two and half weeks. Perhaps a stronger trend for the BRL and its fight back against the U.S Dollar will raise cynical viewpoints, but the BRL may have additional room to recover strength. An important support level for the Brazilian Real looks to be the 5.200 mark. If this support is penetrated traders may be tempted to pursue its stronger trend and look for a value of 5.000 which is still nearly 20% weaker than its strongest marks of early January.

Brazil as a nation is still under the microscope of the Coronavirus pandemic.  Traders will want to see statistical evidence that the virus is starting to level off in the South American nation. New case infection statistics did show an improvement earlier this week only to surge again. However, the Brazilian Real during this same time period improved in value and has shown an ability to fight back against the U.S Dollar. The USD/BRL pair may attract traders who want to test short term ranges for speculatively purposes. However, the one month outlook may offer an opportunity for the Brazilian Real to gain additional value and show a positive recovery against the USD.

Brazilian Real Outlook for June:

Speculative price range for USD/BRL is 5.000 to 5.800 during June

Resistance at 5.200 is important and if broken could see the USD/BRL try to test additional support at 5.000

Resistance at 5.600 to 5.800 for the USD/BRL appears to be strong

About the Author
Robert Petrucci
Robert Petrucci has worked in the Forex, commodity, and financial profession since 1993. Important aspects of his work involve risk analysis and advisory services. As an advisor in a Family Office he maintains a conservative approach for wealth management and investments. Robert also works in private finance with investors and companies delivering financial and management services.
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