The Brazilian Real was able to test important support levels near the 4.9000 level last week but reversed and began to see a steady diet of resistance junctures targeted. An important value for the USD/BRL appears to now be the 5.0000 support juncture, while important short term resistance stands out around the 5.4000 mark.
After suffering through a vast crisis due to the Coronavirus outbreak in Brazil, traders seemingly swept their negative sentiment aside in the middle of May and started to sell USD/BRL currency pair. However, last week saw the selling trend suffer a setback and weakness began to creep into the Brazilian Real again, but key resistance levels have been maintained and in yesterday’s trading the 5.2400 juncture saw push back and renewed selling of the USD/BRL.
The current values for the USD/BRL could prove to be dangerous waters for traders who do not use risk management wisely. The current price range for the Brazilian Real highlights choppy terrain exists and this has been proven with a couple of gaps taking place in the USD/BRL pair when trading opened the past week. The Brazilian Real is proving vulnerable to sudden sentiment shifts and the USD/BRL doesn’t have a huge amount of trading volume which means gaps should be expected on occasion.
Traders who believe the Brazilian Real has lost too much value the past week can certainly use technical charts to boost their perceptions. The 5.2000 level appears to be a good level to try and short the USD/BRL and aim for support levels below which look potentially fragile for a solid profit. While support at 5.0000 looks strong, trading near the 4.9000 did take place last week and it is not farfetched to expect another test of this value again in the short term.
However, traders who believe sentiment in the USD/BRL remains unclear may seek speculative buys too. If a trader seeks a stronger US Dollar they may believe a buy around the 5.1000 level could provide them with a nice surge upwards to achieve a profitable outcome. The name of the game for the USD/BRL will be ‘risk management’ and traders should watch global sentiment in the major stock indices carefully as a correlation if they are unsure of their decisions. Solid gains for international equities could spark a weaker US Dollar short term.
Brazilian Real Short Term Outlook:
Current Resistance: 5.2500
Current Support: 5.1000
High Target: 5.4000
Low Target: 4.9000
