The USD/BRL has produced another leg higher and is traversing near important resistance when technical charts are considered via short- and mid-term. As of this writing, the USD/BRL is near the 5.2300 level and important resistance junctures appear to rest between 5.2500 and 5.2900. If these higher ratios can continue to produce reversals lower, speculators may be attracted to the notion of pursuing selling positions based on an assumption that the USD/BRL is going to produce a natural cycle of bearish action sooner rather than later.
The problem with this hope for bearish momentum to suddenly emerge could be flawed and that is clearly why it is a speculative wager. The USD/BRL has a rather blatant history of producing uncorrelated moves within the world of Forex and this is due to its rather light transactional volume. However, when the USD/BRL does trend, it typically does this in a rather strong manner; the problem is that the short term can also exhibit plenty of small reversals which tend to knock out traders who are using very tight stop losses and are not willing to hold positions overnight.
The USD/BRL moves in a rather polite manner, but its moves are magnified because of leverage which is frequently used when trading the Forex pair in order to try and take advantage of the incremental volatility. The USD/BRL was trading near 5.0500 as late as the 29th of July. The move higher since then did test a high seen on the 20th of July near the 5.2900 juncture, and this is interesting because two recent attempts to topple this high water mark failed on the 3rd and 6th of August.
When the USD/BRL opens for trading today after the weekend, traders should keep their eyes on resistance certainly. If the 5.2500 mark proves durable this may indicate that the USD/BRL could be ready to demonstrate some selling momentum. Clearly the 5.2000 juncture could prove very important too, because if this mark is punctured lower and sustained it could signal that further selling may be seen.
Traders should remember to use carefully selected price ratios as goals within the USD/BRL. Because the Forex pair often moves in a rather comfortable manner, traders tend to speculate with too much leverage making their wagers dynamic and very vulnerable to short-term fluctuations. The USD/BRL may be ready for some bearish momentum to be demonstrated near term and wagers looking for downside action may prove to be worthwhile.
Brazilian Real Short-Term Outlook:
Current Resistance: 5.2590
Current Support: 5.2280
High Target: 5.2940
Low Target: 5.1990
