After traversing within the higher elements of its price range the past week, the USD/BRL has returned to the lower realms of its value. The USD/BRL closed near the 4.8700 juncture yesterday, after having touched a high of nearly 4.8970 after gapping upwards when Monday’s trading started. The U.S jobs numbers which were published last Friday caused volatility and saw the USD/BRL spring upwards to the 4.9400 level, only to fall back quickly and test the 4.8600 mark in about two hours.
The USD/BRL remains within the confines of a rather tight range. Speculators who want to wager on the currency pair need to understand the USD/BRL has a limited amount of trading time during the day and that it frequently experiences gaps upon opening. Yet the USD/BRL is intriguing as a speculative asset because it does provide rather solid tests of support and resistance levels.
USD/BRL Return to Support Ratios and a One-Month Chart
The USD/BRL is now trading at levels that it traversed leading up to the Christmas holiday. The 4.8700 ratio was tested on the 19th and 20th of December. This highlights that while the trading volumes in the USD/BRL were extremely light during the holiday season the currency pair has essentially returned to values it began testing following the U.S Federal Reserve’s FOMC Statement on the 13th of December. This is likely not a coincidence and shows financial institutions that have now returned from their holiday vacations are back in control of the USD/BRL.
Short-term traders will likely be tested today and tomorrow with rather tight consolidated trading in the USD/BRL. Yes, the currency pair will certainly move and be speculated upon, but traders should not expect too much volatility. However, this coming Thursday the U.S. will issue important inflation data via the Consumer Price Index reports, and if there are any surprises the USD/BRL is likely to react with volatility.
Risk Appetite and Speculative USD/BRL Positions Short-Term
- Because the USD/BRL is trading near important support levels there may be a tendency among some speculators to look for reversals higher. However watching today’s opening should provide additional clues regarding short-term sentiment.
- The USD/BRL has tested the 4.8500 and 4.9300 realms rather intriguingly over the past few weeks. Yes, there have been outliers that have moved to lower and higher values, but this range may continue to be held until the U.S CPI numbers which will be published this Thursday.
- For the moment the USD/BRL will stay in a highly USD-centric mode.
Brazilian Real Short-Term Outlook:
Current Resistance: 4.8820
Current Support: 4.8630
High Target: 4.9080
Low Target: 4.8430
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