The USD/BRL went into the weekend near the 5.1085 ratios after having challenged mid-term lows earlier on Friday. The ability of the USD/BRL to get stronger even as financial houses have concerns about the Brazilian government’s fiscal policy is intriguing and perhaps dangerous for speculators. The fact that the 5.0500 ratios became a talking point as support again last week may be surprising to traders who have a bullish outlook regarding the USD/BRL.
The fact the USD/BRL has challenged lower values and is flirting with long-term support ratios that have proved important since the middle of June is critical. Remaining stuck in a losing trade, and refusing to acknowledge the market reality can cause costly mistakes for traders. The ability of the USD/BRL to consistently move towards the 5.0700 to 5.0600 levels creates a tough question for bullish traders.
USD/BRL Trading Near Seven Month Lows as it Challenges Support
While the USD/BRL trades near important lows some traders may be tempted to look for upside momentum to develop not believing the currency pair can go lower. Today’s trading as always in the USD/BRL should be watched as the Forex market opens because early price action is likely to cause a gap in the value.
- The 5.1000 ratio may prove to be important. If the USD/BRL stays above this level perhaps traders may be tempted to aim for narrow targets above buying positions.
- A sustained move below the 5.10000 mark today after the opening may indicate the 5.0700 area will begin to be challenged again
Near-Term Results in the USD/BRL may provide Key Speculative Evidence
Trading in the USD/BRL may remain rather cautious in the near term, this as the U.S. Federal Reserve interest rate policy is due to be pronounced on Wednesday. Leading up to the U.S. central bank decision, if the USD/BRL remains near important support levels this could indicate further bearish trading may take place. Speculators should brace for the potential of volatility.
Having already traded towards important support levels, contrarians may believe the USD/BRL will begin to turn upwards again and target higher resistance levels. The USD/BRL however, has proven in the past week of trading that the lower move has not produced a violent reversal upwards, which may indicate the currency pair remains correlated rather well to USD weakness being seen in many other major currency pairs.
Brazilian Real Short-Term Outlook:
Current Resistance: 5.1230
Current Support: 5.0860
High Target: 5.1620
Low Target: 5.0555
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