The USD/BRL has proven capable of maintaining its short term bearish trend, and trading the past twenty-four hours which has established support levels may continue to be tested. Current support for the USD/BRL appears to be the 5.0800 mark. After trading near the 5.1000 mark yesterday a small buying reversal became apparent, but the move upwards did not prove strong and as of early this morning a vicinity of 5.1000 to 5.1200 in value for the USD/BRL has been demonstrated.
Brazilian equity indices turned in a cautious day of trading yesterday, but the markets certainly didn’t experience a strong sell-off. The percentage gain for the Brazilian Ibovespa the past month is above 8%, which indicates investors remain optimistic. Additionally, the early calls for Brazilian equities today are positive and US futures are signaling potential gains.
After facing headwinds starting in mid-June regarding its economic outlook and legitimate concerns regarding coronavirus, Brazil appears to have found solid investor risk sentiment again. The USD/BRL did mount a steady bullish trend from the 9th of June until the beginning of July. However, since the 1st of July when the USD/BRL was near a value of 5.4700, the Brazilian Real has experienced definite bearish selloff.
Within its current price vicinity, speculators will have to ask themselves if the USD/BRL has the ability to continue its downward trend. Traders who have an optimistic perception regarding global risk appetite may believe the USD/BRL has the ability to retest low watermarks experienced late in the first week of June and challenge them with more selling.
While the value of the Brazilian Real may cause some speculators to look for reversals upward, they should first look at current resistance levels. Traders will notice resistance marks have incrementally decreased too, which means the recent wave of trading has not happened with sudden spikes and has actually occurred within a comfortable technical trading band.
If current resistance levels stay strong and are not broken upwards, the USD/BRL will remain a tempting forex pair to sell. Risk appetite is a key ingredient for the Brazilian Real and if global equities remain strong and domestic indices in Brazil find buyers, the USD/BRL may prove current support levels will become vulnerable too.
Brazilian Real Short Term Outlook:
Current Resistance: 5.1600
Current Support: 5.0800
High Target: 5.2500
Low Target: 4.9500
