After demonstrating a rather solid bearish trend since late October and touching low values in the middle of December, the USD/BRL has seen slight bullish momentum develop. However, the recent trend of the USD/BRL should not come as a shock. Trading volumes were incredibly low last week as the holidays approached and they will remain rather lackluster this week too, which is a reason for the rather choppy conditions.
What should intrigue speculators regarding the USD/BRL is the rather polite and fragile incremental move higher which occurred last week. Important resistance levels will be tested early today when the Forex pair begins to trade in earnest. If resistance near the 5.2300 to 5.29.0000 levels proves to be adequate, this may be an important signal to traders that the bearish trend of the USD/BRL remains intact and should be pursued.
The USD/BRL has produced choppy trading at times for speculators and has demonstrated occasional volatility. Behavioral sentiment within the USD/BRL is important and global risk appetite certainly has an effect on the Forex pair, but its bearish trend remains a tantalizing prospect for speculators.
If resistance proves to be strong in the midst of light volumes and support levels continue to attract selling momentum, traders may be inclined to believe that the 5.1700 to 5.1100 junctures will remain a target and prove vulnerable. Trading in mid-December showed that the USD/BRL is capable of challenging the 4.0000 juncture, and speculators may believe that the bearish momentum within the Forex pair has not achieved ultimate goals yet. Short-term traders will have to practice risk management as lower volumes make the USD/BRL susceptible to potential fluctuations. However, the Forex pair is rather consistent and tends not to suffer from large spikes.
Selling the USD/BRL near term appears to be an intriguing possibility. The slight rise in values the past week took place with light holiday volumes, and the potential for the Forex pair to reignite its bearish trend is attractive. Resistance levels should be watched carefully and tight stop losses should be used to guard against moves that could get out of control. Remaining a seller with the USD/BRL appears to be a logical decision with a belief that support levels will be tested by potential reversals off temporary highs.
Brazilian Real Short-Term Outlook:
- Current Resistance: 5.2490
- Current Support: 5.1700
- High Target: 5.2900
- Low Target: 5.1100
