USD/BRL: Move Higher in Brazilian Real Could Attract Traders

 Justin Paolini

The USD/BRL has produced an incremental climb higher since the 25th of June, but its highs made this past Friday will be put to a quick test today.

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After hitting a low of nearly 4.8900 on the 24th and 25th of June, the USD/BRL has incrementally climbed higher. Its results must be looked at carefully via technical charts and fundamental sentiment which has been generated the past week. The USD/BRL hit a high of nearly 5.0750 on Friday before going into the weekend.

However, the highs made in the USD/BRL came in the midst of the U.S jobs report being brought forward, which may have caused some financial houses to be risk-averse and pursue USD buying positions before going into the weekend. Traders should also note that U.S traders will be scarce today because of the long U.S holiday weekend, which means the USD/BRL will be without the influence of some institutional transactions and volumes will be lighter than normal.

After reaching highs on Friday, which were last seen on the 21st of June, the USD/BRL did trade slightly lower but not with a lot of force. As the USD/BRL opens for trading today, speculators will likely take into account that many of the major currencies have been stronger against the USD early. Unfortunately, as experienced traders also know, the USD/BRL doesn’t always cooperate with correlated trading results via technical charts when compared to other currencies.

Speculative bears that have pursued the downward momentum of the USD/BRL the past couple of months may feel like the higher values which have been demonstrated may prove to be a selling opportunity.  Support junctures which are nearby at 5.0300 may prove to be tempting as targets for short positions, but because volumes will be lower than normal today, traders need to have their take profit orders activated and stay alert.

Selling the USD/BRL appears to be the attractive wager. After producing an incremental climb higher the past week of trading, searching for reversals lower may prove to be worthwhile. However, if the USD/BRL continues to rise and the 5.0800 level is broken higher bullish speculators may look for the 5.1000 price as a logical ratio with the belief it could prove a dynamic magnet short term. Risk management will be important short term in the USD/BRL because of the absence of U.S traders today and the potential for volatility.

Brazilian Real Short-Term Outlook:

Current Resistance:  5.0680

Current Support:  5.0300

High Target: 5.0880

Low Target:  4.9900

USD/BRL Chart

 Justin Paolini

Justin Paolini helps traders succeed through 1-on-1 coaching at BuildingaTrader.com. He is also Head of Trader Development at FCI Markets UK. Justin has over 15 years of experience trading Forex of which 3 were spent as a Sales Trader and as a Broker. Previously, he was an analyst at 3CAnalysis.com, producing institutional grade directional calls. His market commentary has been published on FXRenew.com, Yahoo! Finanza, Trend Online, FX Street, OrderFlowtrading.com, and ForexTell.com. For the past 8 years, he has dedicated himself to helping others succeed, and has been a guest lecturer at the University of Ancona on Trading and Market Dynamics.

Justin holds a B.A. in Economics & Finance from UNIVPM, Ancona, and a Masters in Finance, Banking & Insurance.

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