USD/BRL Analysis: Range Trading but a Move Towards Short-Term Lows

The USD/BRL held onto lower trading ground yesterday as it continued the declines which started on late Thursday and into Friday of last week.

  • The USD/BRL has been able to build some bearish momentum the past couple of days in Forex.
  • The currency pair finished Monday near the 4.9535 ratio, which is a low that was produced last Wednesday.
  • The USD/BRL is trading within a known range, the upper realms, of its mid-term values.
  • The currency pair is correlating to broad Forex action as financial institutions seemingly have found temporary equilibrium as they wait for the next hit of impetus which will shake Forex.

USD/BRL Analysis Today - 13/02: Eyes Short-Term Lows (Graph)

Technical traders may be looking at the current support and resistance levels which have developed the past week as attractive, but before they get overly excited speculators need to know the U.S will release important inflation data today. The U.S Federal Reserve is still perceived as ready to cut interest rates in late spring of this year, but the past month in the USD/BRL and other currency pairs has shown that financial institutions have grown cautious. If the Consumer Price Index numbers from the U.S today produce surprises, this could suddenly throw known short-term technical ranges into chaos.

The 5.0000 Resistance Level in the USD/BRL

The 5.000 level in the USD/BRL has worked as a resistance level in the USD/BRL, on the 8th of February it was approached but the currency pair was pushed backwards near the 4.9990 ratio. If today’s inflation numbers come in stronger than expected this could ignite buying in the USD/BRL. Risk management will be essential. However, traders need to also imagine what could happen if the CPI results are weaker than expected, because it would likely spark an opposite reaction.

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An outcome which is below the anticipated CPI data from the U.S today could spark selling of the USD/BRL. It might be wise for day traders to wait and see what happens via the U.S inflation reports and then take action in the USD/BRL. Traders who indulge in adventure and want to position before the release of the CPI data should not be overly ambitious and use their risk management effectively.

The 4.9000 Support Level in the USD/BRL

The past month of trading has largely produced a range between 4.9000 and 4.9900 in the USD/BRL. Price action in the USD/BRL may become wider today and test these values. Inflation is something that continues to worry the Federal Reserve and financial institutions globally. U.S economic data has been mixed the past couple of months. Today’s CPI data will help create better outlooks for traders.

  • Traders should use entry price orders if they choose to trade the USD/BRL in the midst of the U.S data release today.
  • Quick hitting trades may prove effective, but if a surprise outcome is demonstrated in the inflation reports today, this could cause a trend to develop which could become stronger than USD/BRL technical traders had been anticipating.

Brazilian Real Short Term Outlook:

Current Resistance:  4.9590

Current Support:  4.9480

High Target: 5.0100

Low Target:  4.8940

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Robert Petrucci
Robert Petrucci has worked in the Forex, commodity, and financial profession since 1993. Important aspects of his work involve risk analysis and advisory services. As an advisor in a Family Office he maintains a conservative approach for wealth management and investments. Robert also works in private finance with investors and companies delivering financial and management services.