USD/BRL: Brazilian Real Price Range Creates New Questions

Robert Petrucci

The USD/BRL fell to three-month lows on Thursday and Friday before experiencing a reversal higher.

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The USD/BLR continues to display the ability to traverse lower. Late last week, the USD/BRL challenged the 5.3300 level before experiencing a reversal higher as Friday’s trading came to a close. The USD/BRL fell to lows not demonstrated since the middle of February, and traders need to take into consideration the important support level which was tested. If support near the 5.3300 can be proven to be vulnerable, there is a large amount of room for the USD/BRL to actually traverse lower and test January values which saw the 5.1800 mark roamed.

However, before traders climb merrily onto what they perceive as a certain trend down, they are reminded to also look at a three-month chart which shows that the current value of the USD/BRL has often sparked a move higher. In fact, when the USD/BRL opens for trading today, it will likely not be near the 5.3300 to 5.3500 junctures below, but will be closer to the 5.4300 mark it is within the vicinity of now. The move higher on Friday after reaching lows can be considered a logical short cyclical push after an important support level was tested, but it could prove to be more sinister.

Traders are encouraged to use limit orders with the USD/BRL and continue to look for quick-hitting trades. The momentum within the USD/BRL has certainly seen a bearish trend emerge the past month with an incremental lowering of resistance levels. If traders want to continue to pursue downside price action they cannot be faulted. The use of nearby resistance levels as stop-loss protection is a reasonable approach to selling the USD/BRL.

While the recent trading of the USD/BRL has indicated that bearish momentum may continue to be exhibited, traders who want to proclaim that the Forex pair has created a new price range may want to wait until the USD/BRL consistently proves it can sustain its value below the 5.3900 mark. Until then, the USD/BRL may continue to produce frequent reversals which test trading stamina. However, speculators are likely leaning towards the technical perception that more downside ability is possible.

Selling the USD/BRL on slight reversals higher may be the best conservative approach to trading the Forex pair. The juncture of 5.4400 to 5.4600 could prove to be an enticing place to short the USD/BRL while looking for quick bearish moves which aim for the 5.4200 to 5.4000 marks.

Brazilian Real Short-Term Outlook:

Current Resistance:  5.4650

Current Support:  5.3900

High Target: 5.5050

Low Target:  5.3300

USD/BRL Chart

Robert Petrucci
Robert Petrucci has worked in the Forex, commodity, and financial profession since 1993. Important aspects of his work involve risk analysis and advisory services. As an advisor in a Family Office he maintains a conservative approach for wealth management and investments. Robert also works in private finance with investors and companies delivering financial and management services.

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