The US dollar has been chipping away at the 5.73 real level over the last several months, and it appears that we are getting ready to have another go at it. The area has been somewhat resistant, but as long as emerging market currencies are going to be less favored, it makes quite a bit of sense that the real will suffer as a result. Furthermore, Brazil has had a rough go with the virus, so that is had a major impact on its economy.
All things being equal, the US dollar has been strong against most currencies, so none of this should be a surprise. The 50 day EMA sits at the 5.58 level and is gaining quite rapidly. I think the 50 day EMA is which could use for dynamic support, and I think at this point time we are simply trying to squeeze our way to higher levels. Whether or not we can do that on Christmas Eve or even the week between Christmas and New Year’s is a completely different question, but as markets will be thin, you could see a sudden rush in one direction or the other of the big order comes through. You see that in some other pairs, and one would have to think that exotic pairs or even more susceptible to this.
It is because of this that I would be very cautious about my position size, but I do recognize that this is a market you cannot be selling. The market has been very bullish for quite some time, and now it looks like we are grinding away to try to take out that barrier finally. Once we do, that opens up the possibility of going to the 6.00 real level, which is the next major psychological figure. In general, this is a “buy on the dips” type of situation, and that's how I'm going to trade this market overall. I will be building up a position slowly, because of the liquidity issues in the trouble that that can bring with a sudden move. Keep in mind this pair does tend to be a bit of a grinder, but it does of course trend for very long periods of time, making it a great swing trading instrument, if you are patient enough to collect the gains that are offered.
