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USD/BRL Analysis: Another Turn Higher as USD Centric Influences Hit

The USD/BRL correlated to the broad Forex market and traded higher in the wake of the better than expected U.S jobs numbers the past two days.

USD/BRL Analysis Today - 11/06: USD Rises Again (Chart)

  • The USD/BRL closed yesterday’s trading near the 5.3545 ratio, which was actually below the starting point for the currency pair.
  • The USD/BRL gapped higher on early Monday and touched a level of nearly 5.3778 briefly before financial institutions became calmer and were able to generate some selling.
  • However, the USD/BRL remains within a price range that has not been tested since January of 2023 as higher values get tested.

Yet, the surge higher in the USD/BRL actually started in mass on Friday. Yes, the USD/BRL has been trending higher since late April of this year as the Brazilian central bank started initiating interest rate cuts, but the strong move upwards at the end of the last week was generated on stronger than expected U.S economic data. However, there is a question that lingers casting doubt on the strength of the U.S jobs numbers, and this sets the stage for today and tomorrow’s USD/BRL trading which should be watched as more economic numbers get interpreted.

USD/BRL Lower Near Term Depths and Then a Bang Upwards

The USD/BRL was trading near the 5.2380 ratio on Friday before the U.S jobs numbers were printed. The USD/BRL actually opened with a slight gap lower also on Friday, but after the publication of the U.S jobs data the USD/BRL climbed and mirrored other currencies which quickly lost value to the USD. While Friday’s lows were not the deepest depths for the USD/BRL last week, trading was showing it was moving in a cautious manner related to the broad Forex market and showing a desire to move lower.

The U.S will release important inflation data early tomorrow via the CPI number and later on Wednesday the U.S Federal Reserve will make their FOMC Statement. The Fed is not going to lower its interest rate tomorrow, but financial institutions are hoping to hear a more dovish U.S central bank. Unfortunately sentiment got rattled for many traders on Friday of last week because of the stronger Non-Farm Employment Change numbers, which caused many to alter their outlooks regarding what the Fed will say tomorrow.

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    USD/BRL Sideways Price Action and Speculation

    Yesterday’s sideways price action in the USD/BRL may be repeated today as financial houses become conservative and simply wait for tomorrow’s U.S economic data and the Fed. Traders should practice quick hitting trades today if they insist on betting.

    • The USD/BRL is certainly within the higher elements of its long-term price range and some traders may believe the currency pair has been overbought.
    • However, for the USD/BRL to generate significant lower price action it will need the impetus of weaker U.S inflation data and a more dovish sounding Federal Reserve tomorrow.
    • Traders pursuing the USD/BRL before tomorrow’s CPI and Fed rhetoric need to use solid risk management because volatility will be seen on Wednesday.

    Brazilian Real Short Term Outlook:

    Current Resistance:  5.3590

    Current Support:  5.3500

    High Target: 5.3710

    Low Target:  5.3320

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    Robert Petrucci
    About 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.

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