The USD/BRL traded in a correlated manner to the broad Forex market yesterday and closed near short-term highs. What is likely going to intrigue day traders is the notion that mid-term resistance levels are now in sight for the USD/BRL, this as questions arise about global risk sentiment, and developing behavioral sentiment is contemplated. The USD/BRL closed near the 4.9432 mark yesterday, and as always traders need to be braced for potential gaps when the currency pair opens today.
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The short-term highs achieved yesterday touched marks last seen on the 10th of November. What might interest technical traders depending on their perspectives, could be the notion the last time the USD/BRL touched these ‘higher’ levels that selling was ignited and a low of 4.9000 was challenged on Monday the 13th of November. The resistance levels above for the USD/BRL could prove to be the 4.9540 ratio.
Short-Term Choppiness as Headwinds Developed in USD/BRL
Last Friday the USD/BRL touched a low of 4.8640 which hit values previously seen on Wednesday. Choppy conditions and incremental movement higher in the USD/BRL has been seen the past two days of trading, perhaps this has been caused by financial institutions which believe equilibrium has been found in the currency pair for the moment. Speculators who believe the USD/BRL has been overbought in recent trading may be proven correct, but the near-term may remain rather choppy.
Risk appetite globally has shown some teeth, but yesterday U.S equity indices turned in a muted day of trading with slight losses. U.S economic data will be seen today via a Services PMI, but large players are bracing for the Non-Farm Employment Change and Average Hourly Earnings reports this coming Friday. On top of this information is the acknowledgement that on the 13th of December the U.S Federal Reserve will release its FOMC Statement. Although the Fed is widely expected to begin taking on a more neutral monetary policy stance officially, financial houses may have sold off the USD already after factoring this into their outlooks over the past few weeks, and they may be waiting for additional reasons to sell again.
USD/BRL and the Search for Impetus by Bearish Speculators
- The current value of the USD/BRL may be perceived as slightly overbought technically. But if resistance is proven vulnerable near the 4.9550 to 4.9600 ratios, this could prove a very choppy trading ground.
- Traders looking for renewed momentum downwards should keep realistic targets in sight and not bet on wildly large declines. Support levels in the short and near-term around 4.9300 to 4.9200 may prove appropriate for quick hitting trades.
- If support falters near the 4.9200 level, it could trigger additional selling and a retest of lows seen last week, but impetus via solid risk appetite in the global markets would likely have to prove strong today and tomorrow for this to happen.
Brazilian Real Short-Term Outlook:
Current Resistance: 4.9520
Current Support: 4.9370
High Target: 4.9630
Low Target: 4.8780
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