The USD/BRL closed yesterday’s trading near the 5.4125 ratio, the downwards accomplishment has taken place in the currency pair after trading within higher realms near 5.5800 before the New Year’s holiday.
Lower volumes and holiday markets have seen the USD/BRL producing a lower trend the past week. After trading near the 5.5800 ratio before the onset of the New Year’s holiday, the USD/BRL closed yesterday’s trading around the 5.4125 mark. However, day traders need to understand Monday’s results occurred with Forex transactions remaining rather low. While financial institutions are operating, the corporations which are the banks’ clients are still largely absent from the Forex arena.
Over the next handful of days full volume will start to look like normal. However, the ability of the USD/BRL to traverse lower is an indication that large players participating in the currency pair have exhibited the belief it had been overbought. Yesterday’s ability to sustain lower depths and in large measure technically showing the 5.4500 as resistance is interesting.
Technical Vulnerability in USD/BRL
Day traders who insist on participating today in the USD/BRL still need to practice conservative risk taking avenues. The volumes in the currency pair do leave the door open to sudden surges that could ruin technical perceptions quickly. Gaps in the USD/BRL could continue to demonstrate wide differentials. Thus, when the currency pair opens today speculators should compare the price to yesterday’s closing numbers.
A gap higher on today’s opening, but a sustained amount of resistance near the 5.4500 level would be a signal that large traders believe there still may be some downside to reexplore via the USD/BRL. The currency pair had seen an upwards trend develop since the 4th of December. The highs around 5.6050 on the 22nd have eroded but are still a memory that some may be fearful of due to a threat of financial institutions entering with higher volume and the chance they will still be nervous buyers. Reactive trading is always a threat.
Short and Near-Term Speculation
The ability of the Brazilian Real to exhibit some strength the past week is significant. But because lighter volumes have prevailed the past few trading days, the results in the USD/BRL are still suspicious.
- Day traders who want to pursue further downside and believe the currency pair can effectively move towards the 5.4000 level and recapture even lower terrain it traded in August (including plenty of the time from September into November with outliers) cannot be blamed.
- However, economic concerns and the return of institutional traders like corporations via their financial houses may produce volatility in the coming days as outlook is questioned.
- Day traders should likely look for quick hitting result today and tomorrow.
Brazilian Real Short Term Outlook:
Current Resistance: 5.4210
Current Support: 5.4090
High Target: 5.4580
Low Target: 5.3950