It is time for a rethink of the USD/BRL for speculators. The Brazilian real has not been able to create a strong bearish trend against the USD. At the end of March 2020, the USD/BRL was trading near 5.0200 and this value was tested in June and mid-December, but essentially the value of the Forex pair has remained within its higher value range consistently.
Conditions within the USD/BRL continue to produce choppy values, which may frustrate speculators waiting for a stronger trend to emerge. However, at this point, traders should start to consider the possibility that the Brazilian real may not be able to produce a strong bearish movement against the USD. Economic implications regarding the effect of coronavirus in Brazil and the negative impact this has created in financial institutions which need to trade the USD/BRL for commercial reasons may be the cause.
The inability of the USD/BR to produce a strong trend essentially is producing an opportunity for short-term traders to take advantage of its limited movements and pursue consistent tests of the pair’s support and resistance ratios. The month of January has produced a rather tranquil range for the USD/BRL largely between 5.1700 and 5.5200. Yes, the Forex pair traded near the 5.1000 mark on the 4th of January briefly, but this may be considered an outlier technically. Highs of nearly 5.5200 were hit on the 11th of January.
Traders of the USD/BRL can take advantage of its choppy values by using limit orders which seek reversals. Placing trades near resistance levels and looking for reversals lower and placing trades near support levels looking for moves higher is a potential winning calling card for speculators. Traders who continue to look for bigger moves may walk away feeling frustrated by the USD/BRL’s inability to produce a substantial trend.
However, the limited movements of the USD/BRL actually offer a compelling opportunity for traders if they pursue the pair using limit orders and carefully select stop losses nearby to stop the bleeding if a bigger move than expected develops. The USD/BRL has simply not shown the ability to break out of its current price range. No matter the reasons for this consolidation, speculators have a chance to pursue quick-hitting trades in the Forex pair if they are able to monitor the USD/BRL’s value band carefully with long and short positions.
Brazilian Real Short-Term Outlook:
- Current Resistance: 5.4100
- Current Support: 5.2900
- High Target: 5.4900
- Low Target: 5.1800
