As global risk appetite has proven optimistic and many major equity indices challenge new highs, the USD/BRL has seen a flurry of movement.
The sudden ability of the Brazilian real to trade below the 5.3000 level has not gone unnoticed, and the 5.2000 is being challenged as of this writing. The last time the USD/BRL sincerely tested its current price level was in the middle of September.
If its current price band sees additional downside momentum, support targets for the USD/BRL will likely be the 5.1700 level with a lower mark of 5.0800 being eyed. However, before speculators become too optimistic regarding a potential bearish trend, they should take a close look at the recent trading of the USD/BRL and consider the Forex pair’s inability the past few months to generate a sustained trend.
The current price of the USD/BRL is definitely interesting, and important mid-term support is certainly being tested. The USD/BRL may need to break the 5.20000 level and sustain value below this juncture for speculative bearish fever to grow. This is because the Brazilian real has proven to have a rather choppy price range recently.
Technically, traders will certainly find the current price of the USD/BRL worthy to consider. The question, however, is if the short-term bearish trend which has suddenly emerged can be trusted. Speculators may want to see more evidence before they consider pursuing another bearish thrust lower. The USD/BRL has produced rather wicked reversals the past few weeks, but it needs to be mentioned that at the height of risk-averse conditions in late October, the USD/BRL was trading near the 5.8000 level.
The USD/BRL has not experienced a sustained bearish trend against the USD long term. Concerns about Brazil’s fiscal outlook may have caused some headwinds for the Brazilian real. However, the USD/BRL has also been rather steady and has proven it has the ability to create short-term trends.
Speculators may want to remain cautious regarding the USD/BLR and they will have to decide which direction to pursue. Speculators looking for reversals higher at the current price range of the USD/BRL cannot be faulted if they believe the downward trend of the Forex pair has been too fast and will face a counterattack. However, traders who believe positive global risk appetite is a catalyst within the USD/BRL may believe support levels below can be tested near term.
Brazilian Real Short-Term Outlook:
- Current Resistance: 5.2900
- Current Support: 5.1700
- High Target: 5.3500
- Low Target: 5.0800