The USD/BRL went into the weekend near the 5.2075 mark. As the USD/BRL ended the last week of trading the currency pair was able to reestablish bullish sentiment and is now near values last traded in a sustained manner the second week of this month. After touching a low of nearly 5.0675 to open trading this past Wednesday the USD/BRL ran into support and reversed higher.
The move upwards in the USD/BRL doesn’t mirror the results from the broad Forex market. The USD has been weaker against most major currencies and the climb in the USD/BRL speaks to concerns that financial houses still may have regarding the outlook for Brazil’s fiscal policy. In ongoing news surrounding the political unrest, which threatened to unsettle the nation a couple of weeks ago, Brazil’s army commander was relieved of his duties this weekend. However, this news will likely not shake the confidence of financial institutions.
Rumors Swirl Regarding a Joint Currency between Brazil and Argentina
What should intrigue speculators and raise serious questions are rumors being heard about Brazil and Argentina discussing ideas on creating a common currency. Why Brazil would want to entangle its fiscal and treasury future in Argentina’s is a cause for concern. Argentina has not had a solid currency in many years and the potential of Brazil to create a unified currency with its neighbor should raise suspicious eyebrows and create many questions.
- The U.S will release GDP and inflation numbers this week and this might impact the USD/BRL depending on the results.
- When the USD/BRL opens for trading today, traders should be braced for a gap when the market begins. Short-term volatility is likely if financial houses are nervous regarding the rumors regarding Brazil and Argentina talking about a common currency.
Move Up Re-establishes the Higher Price Range of the USD/BRL
If the USD/BRL opens with buying sentiment being demonstrated this may prove to be a nervous bullish reaction. If the 5.2000 ratio is sustained and not challenged lower in the short-term, traders may believe another additional leg higher could develop.
Having traded to a low of nearly 5.0675 last Wednesday shows the USD/BRL can move downwards. However, the reversal higher and the ability to sustain gains made late last week may indicate financial houses feel the currency pair’s true price range may be among these highs and potentially upwards still. Speculators should be careful as the USD/BRL opens today and monitor behavioral sentiment in the near-term carefully.
Brazilian Real Short-Term Outlook:
Current Resistance: 5.2263
Current Support: 5.1920
High Target: 5.2935
Low Target: 5.1590
Ready to trade our daily Forex analysis? We’ve made a list of the best Forex brokers worth trading with.