The USD/BRL, like many other major Forex pairs, suffered a strong bullish surge late last week when the market temporarily shifted violently on Thursday and Friday. However, the Brazilian real has been trading in many respects within its own world and has not been dancing in step with other currencies against the USD. In fact, the USD/BRL has been one of the few Forex pairs which have not demonstrated a solid bearish trend since mid-term.
Since the middle of December 2020, the USD/BRL has seen an incremental rise in value. This doesn’t mean that late last week’s price action was not part of the systematic sudden strength of the USD, but the movement was less of a surprise compared to many other major currencies. It should also be noted that the relative weakness of the Brazilian real may not be a bad thing for Brazil’s overall economy because it is a large exporter.
The question from a technical standpoint for speculators is how the USD/BRL will trade in the aftermath of last week’s surge. Intriguingly, the USD/BRL opened yesterday’s trading with a slight reversal lower, but then began to trade upwards again and the Forex pair actually finished Monday’s trading above Friday’s close. This may be an indicator that the USD/BRL has further room to traverse higher.
The USD/BRL is now within sight of resistance levels not tested since early November 2020. Trading today within the Forex pair will open only fractionally below the 5.6500 level and, if bullish momentum is maintained and the resistance mark of 5.6750 is toppled, traders may want to consider targeting the highs made in the USD/BRL made in late October and November near the 5.7000 to 5.7400 junctures.
The USD/BRL has proven to be a difficult Forex pair to take advantage of via a long-term trend. Traders who have had success with the Brazilian real have likely been short-term traders who have used limit orders and been able to tactically use take-profit ratios without being overly greedy. The direction of the USD/BRL has proven choppy the past year and this is unlikely to vanish anytime soon. Traders who want to buy the USD/BRL if the Forex pair sustains its value above the 5.6000 juncture cannot be faulted in the short term.
Brazilian Real Short-Term Outlook:
Current Resistance: 5.6750
Current Support: 5.5900
High Target: 5.7100
Low Target: 5.5100
