The USD/BLR remains within a strangulated tight value range and remains an opportunity for speculators to test technical limit orders.
The USD/BRL has remained within a tight trading band the past five days, but technical traders may believe that short-term indicators may be setting the stage for a small bearish trend to develop. The USD/BRL remains a hard-fought trading landscape where reversals occur frequently, and support and resistance levels are consolidated. However, the past few days of trading within the USD/BRL have produced an incremental decrease in resistance values.
Speculators may be tempted to believe the current positive sentiment in global markets may increase the capability for the USD/BRL to produce a correlated bearish move in line with other Forex pairs. However, this has proven a treacherous tactic for the USD/BRL over the long term, so speculators need to remain cautious and not seek values which are beyond what appears to be the normal price range of the Forex pair.
The ability the past few days of trading of the USD/BRL, while certainly showing resistance has been quite adequate, also continues to exhibit a tendency for support levels to prove durable. US future markets via equity indices are forecasting a positive opening, and the Ibovespa Index is also suggesting that equities in Brazil will open with gains. Support near the 5.3400 level remains strong and this juncture needs to be proven vulnerable, as the USD/BRL did trade near 5.3300 on the 11th of February.
The tight price range of the USD/BRL remains challenging for speculators, but also delivers an opportunity for traders who are able to use limit orders wisely and look for nearby price targets. Current short-term sentiment may suggest technically that bearish momentum should be pursued, but traders need to remain cautious until current support levels are proven weak, and this has not happened in a while. The lowest value the USD/BRL has achieved this February has been a mark of 5.3000 on the 8th.
Traders who do not believe the USD/BRL can sustain bearish momentum cannot be faulted, and pursuit of higher reversals which test current resistance levels near 5.3900 look reasonable. Yes, the consolidated range of the USD/BRL remains tricky and traders need to be quick and alert regarding their positions. Careful use of leverage is suggested, and perhaps using a wider stop loss compared to a closer take-profit mechanism may prove worthwhile within the USD/BRL.
Brazilian Real Short-Term Outlook:
Current Resistance: 5.3900
Current Support: 5.3400
High Target: 5.4300
Low Target: 5.3100