The USD/BRL closed its trading on Tuesday near the 5.4310 ratio, this after falling quickly on Friday to lows that flirted with the 5.4050 vicinity and having shown an ability to stay within lower realms.
The USD/BRL was trading around the 5.4800 mark on Friday, this after battling resistance the day before around 5.5000. Suddenly upon the speech from U.S Fed Chairman Powell in which he said interest rates in September would have to be reduced, the USD/BRL quickly moved lower and challenged the 5.4050 ratio. The move of the USD/BRL correlated to the broad Forex market.
The past two weeks of trading have seen the 5.5000 level challenged a couple of times, only to see attempts at moving above this level hard to sustain. However, lower reversals and attempts to sell the USD/BRL have shown an ability to create momentum. The past couple of days in the USD/BRL known lower realms are being trading and may prove intriguing, but first some caution is likely to be seen.
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Speculative Plays in Low Volume Forex Pairs
Day traders of the USD/BRL need to be aware the currency pair doesn’t have a lot of volume. The USD/BRL only trades during the Brazilian banking hours for the most part. The USD/BRL however has done well when it is compared to the broad market, the rather stronger lower price range being practiced continues to flirt with lows. In fact yesterday’s selling brought the 5.3960 ratio into sight.
While the USD/BRL is correlating to the broad Forex market, the lows seen on Friday and greater depths seen yesterday momentarily have not touched lows seen from the 12th thru the 15th of August when the 5.3800 level was being brought into sight. It appears financial institutions are continuing to lean into their selling attitudes regarding the USD/BRL, but are waiting for more reasons to become extra aggressive.
USD/BRL is Not A Mirror of the Broad Forex Market
What day traders of the USD/BRL also have to note is the fact the currency pair doesn’t always move in lock step with the broad Forex market. The USD has shown some strength the past couple of days after the large amount of selling it faced on Friday, but the Brazilian Real seems to have held its ground better than other major currencies.
- This opens the door to the potential that some buying action may be seen in the USD/BRL early today if financial institutions feel they need to practice more caution and do not want to find themselves in oversold territory.
- However, tomorrow the U.S will release GDP numbers which will shake Forex including the USD/BRL.
- Traders will need to practice caution today and going into tomorrow’s reports because volatility will strike the USD/BRL as big players try to position before the U.S growth numbers are published.
- Selling the USD/BRL may feel correct, but perhaps waiting for some higher price action to emerge first may be a better tactic for day traders before they ignite their selling orders.
Brazilian Real Short Term Outlook:
Current Resistance: 5.4450
Current Support: 5.4300
High Target: 5.4630
Low Target: 5.4020
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