The USD/BRL has seen a fairly consolidated range emerge the past two days as its current price hovers over mid-term support levels which have proven difficult to puncture lower with sustained trading. While resistance levels were tested yesterday near the 5.4500 juncture, support short term appears to be near the 5.3600 mark.
The inability of the USD/BRL to create more downside momentum after reestablishing its price band in the wake of the US elections - when it went from a high of nearly 5.8000 in late October to the depths of 5.2000 on the 9th of November - should be viewed as a positive development by speculators. The current price vicinity of the USD/BRL suggests the Brazilian real may sustain this range and give traders an opportunity to take advantage of short-term trends while using comfortable stop loss parameters.
Global risk appetite appears steady to optimistic presently, and if this sounds like a weather forecast you are correct, because sudden storms can emerge which may be able to create havoc. However, the USD/BRL prior to the US election did enjoy a rather comfortable and tight price range before risk adverse trading dominated Forex from mid-October until the American vote. The notion the USD/BRL is trading slightly above support levels which have produced reversals higher may be tempting for speculators as signals.
Selling the USD/BRL on slight moves upward that cross into the 5.4000 to 5.4500 range may prove interesting to place a short position and attempt to pursue downside action towards the 5.3300 to 5.2900 junctures below. On the other hand, speculators who feel more comfortable being buyers of the USD/BRL can certainly try to use posted technical support ratios as entry points to take long positions with the USD/BRL.
From a risk reward scenario, on the surface it appears that resistance may be able to become stronger near term if global risk sentiment remains the dominant theme for investors. However, targeting bigger moves may prove difficult within the USD/BRL because of its ability to maintain a fairly consistent price range. However, this should be viewed as positive by potential market participants, because the price action of the USD/BRL should provide adequate protection via stop loss ratios, allowing speculators to pursue their positions relatively comfortably.
Brazilian Real Short Term Outlook:
- Current Resistance: 5.4400
- Current Support: 5.3300
- High Target: 5.4800
- Low Target: 5.2900
