The USD/BRL will return to full trading volume soon and this will test speculative positions quickly. The mid-term bearish trend the USD/BRL has been able to display has been noticeable as support levels have proven vulnerable, but the value of the Forex pair does remain within shouting distance of a known higher price band. The USD/BRL is not a volatile Forex pair for speculators who manage their leverage carefully, but the Brazilian real has proven more than capable the past year regarding its capacity to reverse quickly and not correlate fully with other emerging market currencies against the USD.
As trading begins this week and financial institutions return to the marketplace, the USD/BRL is certain to break free of its recent consolidation which has taken place near lower mid-term values. Trading late last week saw very limited movement before the New Year’s holiday was celebrated. The USD/BRL may see quick early spikes when its trading resumes fully and speculators need to be prepared if they have positions already working.
The junctures of 5.2100 to 5.25000 should prove an interesting focal point for traders who want to watch the USD/BRL’s price action early to try and grasp technical direction. If these resistance levels prove durable near term it may ignite additional bearish momentum within the Forex pair, but speculators may prove wise to watch the first hour or two of trading today to get a feel for USD/BRL as larger volumes return.
If resistance levels above prove adequate, the USD/BRL may actually be indicating that it has the ability to create a semblance of correlation with the global Forex market. The USD has been losing ground across the board to many currencies, but the USD/BRL has really only displayed a stronger bearish trend since late October. Also, the higher resistance level of 5.3000 should have an eye kept on it by traders; if this level comes into focus, it could signal that a reversal higher may be sustained.
Speculators who want to pursue the bearish trend of the USD/BRL, which has been displayed rather well the past couple of months, cannot be blamed. As full volumes return, the Brazilian real will certainly be affected by the influx of new transactions. Support levels near the 5.1500 to 5.1100 marks should be watched carefully; if they falter and prove weak, the USD/BRL may be able to gain additional bearish momentum.
Brazilian Real Short-Term Outlook:
- Current Resistance: 5.2500
- Current Support: 5.1500
- High Target: 5.3100
- Low Target: 5.1100
