The USD/BRL closed near the 4.9470 ratio yesterday after a trading session which produced a rather tight price range. Consolidation has been a factor since early this week. Last Friday before going into the weekend the USD/BRL finished around 4.9850, but opened this week with a rather significant gap lower. These results largely mirrored the broad Forex markets as the USD/BRL came off of nervous highs generated as the USD got stronger against most major currencies last week.
Trading early this week showed that financial institutions are trying to lean towards a more optimistic risk appetite mode, but there is a large amount of nervousness in the broad global markets which continues to act as headwinds and the 4.9300 level has acted as rather durable support. The USD/BRL value before it opens today for trading stands in the middle of near-term technical values when results since this Monday are viewed.
U.S CPI and PPI Data will Affect USD/BRL Trading with Potential Volatility
Today’s inflation report from the U.S. via the CPI numbers is certainly going to cause the USD/BRL sparks and could quickly make consolidated trading from early this week disappear rapidly. Not only will speculators and financial institutions have to deal with today’s Consumer Price Index numbers, but tomorrow the Producer Price Index data will be published too. The combination of these two reports could set the tone for mid-term outlooks for the Federal Reserve, and its influence on the USD/BRL.
While most analysts do not believe the Federal Reserve will raise interest rates in the mid-term, they have been hoping for signals the U.S. central bank could start to change its rather stubborn aggressive rhetoric to a more cheerful dovish viewpoint. However, the cause of a shift for the Fed to suddenly sound dovish, needs today’s CPI and tomorrow’s PPI inflation numbers to come in below the anticipated results of financial institutions.
USD/BRL Range of 4.9000 to 5.000 Technically Important
- The price range of the USD/BRL between 4.9000 and 4.9900 may look technically important, but these levels could be tested swiftly today and tomorrow depending on the U.S. inflation results.
- If U.S. inflation results are weaker than estimated the USD/BRL could produce more selling, but if the numbers are stronger than a stronger USD may materialize.
- There is likely to be a gap upon the opening for the USD/BRL today as financial houses position for the CPI results. Traders should be very careful in the opening hours of USD/BRL trading because volatility is likely to be demonstrated.
Brazilian Real Short-Term Outlook:
Current Resistance: 4.9570
Current Support: 4.9390
High Target: 4.9990
Low Target: 4.8960
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