The USD/BRL traversed lower late last week and is testing short-term support levels, but its current value range remains intact.
Some speculators may look at a short-term chart of the USD/BRL and believe that bearish momentum is showing signs of strength and has the ability to finally bust through what has become a durable value range. However, the long term has produced a rather protracted battle of prices, which has often driven traders with bearish sentiment slightly crazed.
While many other major currencies paired against the USD have seen long runs of bullish momentum demonstrated, the Brazilian real is not among them. Late last week’s slight move down remains above important support levels and the 5.5500 mark should be watched closely. The USD/BRL is near the 5.5800 vicinity and, upon starting its trading day, some speculators may be eyeing lower targets which ‘feel’ achievable. It should be kept in mind that the last time the USD/BRL traded below the 5.5500 level with any sincere effort was during the third week of March.
The USD/BRL remains within the upper realms of its mid-term range. In the second week of December, the USD/BRL was trading near the 5.0000 vicinity and has incrementally climbed higher since this time. Traders may continue to remain bullish regarding the USD/BRL and look for moves higher while using nearby support levels as stop losses.
Even when the USD/BRL reached a low water mark of 5.4500 on the 19th of March, it did not show much ability to challenge values below which were tested in February. Since the second week of December, the USD/BRL has incrementally risen in value. Traders may want to consider the recent move downward within the USD/BRL as a correlated move with many other major currencies against the USD, but they may be proven wrong.
Until the USD/BRL is able to prove it can mount a sustained test below the 5.5500 juncture, traders may want to use this support juncture as a potential location to actually pursue upside momentum. Technically, the USD/BRL may have to trade below the 5.3900 juncture before speculators can consider the Forex pair within a legitimate bearish move.
Brazil’s economic concerns due to coronavirus may be acting as support mechanism for a weaker Brazilian real. Fundamentally and technically, the USD/BRL remains a rather attractive buying opportunity on slight moves downward. Yes, the Forex pair could suddenly put in a strong bearish move, but until current support levels are broken, speculative wagers may favor buyers and upside price action in the USD/BRL.
Brazilian Real Short-Term Outlook:
Current Resistance: 5.6281
Current Support: 5.5580
High Target: 5.6800
Low Target: 5.5230