The Brazilian Real has lost further ground to the USD in recent trading. Since the 18th of September the USD/BRL has seen a definite bullish trend develop and even though the value of the forex pair may appear to be consolidated, nervous sentiment certainly seems to be causing buyers to pursue upside momentum incrementally.
Critical resistance levels are within sight and speculators may be tempted to believe the rather tight range of the USD/BRL could collapse within the next handful of days as the US election draws closer with its unknown results. The current price level early today of nearly 5.7500 is traversing near higher values not experienced since mid-May. Traders should keep the 5.8000 juncture in mind; because if this level is punctured higher and trading values are sustained it could set off a profound psychological test of value for the USD/BRL.
The 5.8000 level is likely viewed as an inflection point by investors and speculators. If the USD/BRL seriously mounts an attack on the highs the forex pair saw during the height of coronavirus fears in mid-May and breaks through this level it means there is likely another outside wave of impetus having an effect. The wave may be a fear within the marketplace that a Joe Biden victory in the US election could impact Brazil because of the ‘friendship’ Presidents Trump and Bolsonaro have created.
The results of the US election are certainly not known and traders need to understand volatility should be expected within the USD/BRL because of nervous sentiment. It is possible that a ‘surprise’ victory by the current White House administration could cause a strong amount of bearish sentiment to emerge and create swift moves towards support levels below.
Speculators will need to position themselves accordingly and take into account their perceptions regarding the potential for significant impact on the USD/BRL going into the weekend and early next week. Traders cannot be faulted for continuing to pursue upwards momentum from the USD/BRL even as it traverses important resistance levels based on the belief nervous sentiment may puncture these marks and test higher values.
The near term is certain to produce choppy conditions, but if nervous sentiment continues to be demonstrated on global indices and traders believe the US election will produce a victory for Joe Biden now may be the time to speculate on a buying position. However, President Trump certainly will be heard in the coming days and the clear memory of his surprise victory four years ago should serve as a warning for all speculators.
Brazilian Real Short Term Outlook:
Current Resistance: 5.8000
Current Support: 5.7000
High Target: 5.9000
Low Target: 5.6500
