USD/BRL: Brazilian Real Delivering Rhythmic Whipsaw Action

Robert Petrucci

Speculators of the USD/BRL have been treated to multiple repeat performances via the Forex pair’s price range.

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Amidst the large amount of global risk sentiment pervading the international financial markets, and as highs are being seen on many equity indices, the USD/BRL remains tangled within a price range that has shown little determination to trade outside of known values. Price action via the USD/BRL has tested highs and come within shouting distance of support levels, but has not truly broken free from a rather narrow range.

While many other currencies have shown an ability to gain plenty of value against the USD the past six months, the Brazilian real has not been able to muster enough momentum to regain the values it enjoyed before concerns about coronavirus ruled the trading landscape. Yes, the past month has seen a slight incremental bearish trend emerge for the USD/BRL, but the values it achieved in November are fairly consistent with those seen in September and prices seen in late June.

This is not bad news for speculators, however, because the narrow price band of the USD/BRL does open the possibility for traders to pursue small trends. Since the 16th of November, the Forex pair has essentially traded between the 5.2800 and 5.4300 junctures. The question is how speculators take advantage of this range. One option is certainly to use limit orders and use existing support and resistance levels as potential indicators for reversals to take effect.

The rather tight range of the USD/BRL may not sustain itself near term, but until the Brazilian real can sustain a price level below or above distant support or resistance levels, a new trend is not a major threat. Stop losses should be used to guard against a trend suddenly emerging which breaks out of the rather tight range. However, until then, traders may be tempted to use quick positions and essentially scalp pips from the USD/BRL.

If a trader is looking for the whipsaw range of the USD/BRL to end, and a new range to suddenly dominate, global risk appetite should be inspected. While Brazil is certainly under the shadow of tough fiscal conditions, the nation is still an emerging economic powerhouse. Therefore, the thought that the USD/BRL can develop a stronger bearish trend may be a logical choice as a speculative endeavor. However, until support below the 5.2000 level is broken lower, traders should look for short-term moves that take advantage of small trends via quick buying and selling positions.

Brazilian Real Short-Term Outlook:

  • Current Resistance: 5.4220
  • Current Support: 5.3300
  • High Target: 5.4700
  • Low Target: 5.2800

USD/BRL

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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