Bearish momentum in the USD/BRL continues to be demonstrated and the currency pair closed around 5.1900 yesterday. On Monday the USD/BRL was able to also produce lower price action, this after Friday’s close around the 5.3300 vicinity. The ability of the Brazilian Real to recapture its strength and move back to within sight of long-term lows via the USD/BRL, as the broad Forex market remains nervous and persists with a high degree of USD buying, is rather remarkable.
The Central Bank of Brazil will be meeting today and tomorrow. Financial institutions appear to be leaning into an anticipated interest rate cut. Also it should be noted the U.S Federal Reserve will release its FOMC decision tomorrow and the Fed is expected to sound rather cautious and not offer much guidance due to the Iranian war.
Momentum Lower and Looking Forward
The USD/BRL long-term bearish streak has been able to withstand nervousness caused by the Iranian war. On Friday the 27th of February the currency pair was around the 5.1300 vicinity. A high in the USD/BRL was touched early last week and again on Monday of this week as nervous buying brought the 5.3300 area into sight. However, the ability to move lower last week and again the past day and a half showing sustained values that remain close to levels seen in May of 2024 is a solid bearish signal.
The Central Bank of Brazil remains trusted by financial institutions, although there is certainly political intrigue still taking place behind the scenes as President Lula da Silva’s government is slow to fill the vacant seats on Brazil’s Monetary Policy Committee. The Presidential election that is growing closer in October of this year also, this may also be influencing behavioral sentiment of financial institutions.
Brazilian Real Not in a Vacuum
Although the USD/BRL has been able to show consistent bearish capabilities it is also still showing signs of capable nervous buying, particularly the past two Mondays. The Central Bank of Brazil’s interest rate decision that is due to be released will certainly cause some volatility in the near-term.
Day traders should be careful of the notion that large players may have sold the USD/BRL before the central bank’s decision, this because they have anticipated a rate cut.
Today’s trading is likely to be rather cautious and perhaps lower ground will be wagered upon by some large participants.
The 5.1700 to 5.1400 realms look interesting as wagers for lower price action.
Wednesday’s trading is certain to be rather choppy and a reversal upwards after the Central Bank of Brazil’s rate decision announcement wouldn’t be a shock for a short period of time
And then when the market calms potentially, another attempt at lower price action may resume.
News developments from the Middle East should be given attention too, any big surprises could rattle short-term trading decisions.
Brazilian Real Short Term Outlook:
Current Resistance: 5.2050
Current Support: 5.1810
High Target: 5.2450
Low Target: 5.1420