The USD/BRL has developed what appears to be a sincere bearish trend since the end of October. However, speculators who have been wagering on the Forex pair’s movement know the Brazilian real has produced considerable choppiness with some rather unpleasant reversals on occasion.
Since hitting a high of nearly 5.8000 on the 29th of October the USD/BRL has managed to produce an incremental trend downwards. As of this morning’s writing, the Forex pair is now within mid-June values and testing support which, if broken lower, could cause a rather rapid test of prices not seen since the first week in June when the USD/BRL tested the 4.8000 level before experiencing a reversal higher.
The question speculators want answered is if the current bearish trend of the USD/BRL will finally challenge early June values and make a sustained run at a price band not traded since the first couple of weeks in March. Unlike many other currency pairs, the Brazilian real has not been able to re-establish its pre-coronavirus values. While the USD has been within a weaker mode internationally, as of yet the USD/BRL has not seen the same trend lines compared to many other Forex pairs.
The 5.1000 level may prove to be important for the USD/BRL. It has been challenged the past couple of days, but trading has not been able to sustain its value below this key support level. If trading remains near the 5.1000 vicinity and finally breaks below the mark and sustains a range beneath the value it may signal that further bearish activity is going to develop.
Resistance levels within the USD/BRL have proven adequate short term, and this should give speculators who are pursuing bearish momentum a rather comfortable stop loss ratio. Global risk appetite remains strong and the USD/BRL may also see correlations based on more risk-taking. If resistance levels around the 5.1600 prove resilient, the USD/BRL could be indicating accumulation and the potential for a real test of values below.
Selling the USD/BRL appears to be the logical choice for traders who are intent on following the trend which has been established. Although the USD/BLR has produced reversals upwards from the current values it is trading in, now may be the time to test the Forex pair’s downward momentum with the belief that support levels may prove vulnerable near term.
Brazilian Real Short-Term Outlook:
- Current Resistance: 5.1600
- Current Support: 5.0800
- High Target: 5.2000
- Low Target: 5.0100
