The USD/BRL has traded in an extremely tight price range the past week as financial houses seemingly are content with the current price equilibrium.
The consolidated price range of the USD/BRL could prove to be a speculator’s delight or cause them nightmares short-term. The past week of trading within the USD/BRL has seen a price band essentially between the 5.0330 and 5.0850 marks flourish. Day traders who like to take advantage of consolidated values while looking for quick-hitting momentum or changes in direction without wild fluctuations can certainly wager successfully within this type of range. However, as always the amount of leverage used and time parameters certainly become factors too, and are potential dangers that must be dealt with when speculating.
After Touching the 4.9000 Realms on the 13th until the 17th of April Higher Prices Have Emerged
After trading near lower prices in the middle of April, not seen since June 2022, the USD/BRL has moved higher. The jump in value has not been violent however and the ability of the USD/BRL to sustain an extremely tight price range is a sign that financial houses are cautious, but also waiting on impetus that will certainly come. And this is a warning to day traders; please do not get too comfortable with the consolidated price action now being experienced, because it could change very quickly.
The U.S will publish Core Durable Good results today, but tomorrow’s Advance Gross Domestic Product numbers could cause a rumble throughout Forex including the USD/BRL if there are surprises. If U.S. growth numbers show weakness tomorrow, this could create some selling within the USD/BRL from financial houses which believe the U.S. Federal Reserve will have to start becoming less aggressive over the next couple of months.
Quiet Trading Conditions Should Not be interpreted as Safe in the USD/BRL
Speculators who want to pursue the USD/BRL within the tight price range cannot be blamed, but they should still practice strict risk management. The U.S. Federal Reserve will make its monetary policy and interest rate decision public next week on the 3rd of May, and the rhetoric and anticipated hike of 0.25% is certain to cause a flurry of price action. Experienced traders also know that financial houses may start to position before the Federal Reserve’s FOMC Statement.
- Core Durable Goods statistics from the U.S. today could stir Forex if a surprise result is seen, but tomorrow’s growth numbers and Friday’s inflation data are likely to be more impactful for the USD/BRL.
- Traders need to be cautious and protect their positions against the potential of sudden breakouts from the tight USD/BRL price range.
The lack of a sincerely strong move higher in the USD/BRL may suggest lower values are still anticipated by financial institutions in the coming weeks, but if the Federal Reserve voices an aggressive stance next week those bearish leanings could evaporate. Traders should be careful in the short term and if they choose to pursue the USD/BRL quick-hitting targets may prove the best tactic within the currency pair today and tomorrow.
Brazilian Real Short-Term Outlook:
Current Resistance: 5.0630
Current Support: 5.0410
High Target: 5.0930
Low Target: 5.0280
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