The Carnival holiday which typically would have been seen through the streets of Rio de Janeiro yesterday was absent. The USD/BRL had a day of quiet as a banking holiday was observed in Brazil and coronavirus took its toll on the usual festive streets. The USD/BRL could produce early volatility as financial institutions make their transactions and equilibrium is sought after being forced to remain quiet on Tuesday. However, the USD/BRL has actually produced a strong consolidated price range mid-term.
Intriguingly, the USD proved to be strong against many major currencies in Forex yesterday and speculators of the USD/BRL should be alert for short-term correlations. It is possible that the combination of the banking holiday in Brazil and the inability to effectively mimic global Forex conditions yesterday may deliver fast trading conditions early for the USD/BRL.
Skeptics may be correct to say that the USD/BRL has actually shown little inclination to mirror other major Forex pairs. However, the USD/BRL certainly does not trade within a vacuum, and short-term traders should monitor values today and be ready. Since late January, the USD/BRL has shown an ability to incrementally lower resistance and then test support levels. However, support levels have proven adequate too, and today’s trading may produce upside momentum if the USD/BRL does react to yesterday’s stronger USD movement in global Forex.
The USD/BRL has certainly been consolidated, and resistance near the 5.3900 to 5.4100 junctures has proven difficult to puncture higher. The same can be said for support which has proven durable near the 5.3400 to 5.3100 levels. The absence of bank transactions via financial institutions yesterday should be taken into consideration by short-term speculators and they may want to stay on the sidelines early today when the USD/BRL commences its trading.
However, speculators with a taste for adventure may be inclined to suspect that short-term upside momentum may be prominent today. Traders should not look for massive moves from the USD/BRL considering its ability to maintain a tight value range, but a test of resistance levels which are nearby may be attractive for traders who have the capability to enter the market and position themselves with limit orders. As the USD/BRL opens for trading, speculators should assume that volatility may be demonstrated early, but looking for upside momentum to be demonstrated today may prove worthwhile.
Brazilian Real Short-Term Outlook:
Current Resistance: 5.3825
Current Support: 5.3400
High Target: 5.4100
Low Target: 5.3100
