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Financial institutions trading the USD/BRL have pushed the currency pair higher and yesterday’s closing price of nearly 5.0475 is within the higher elements of its near-term realm. The price of the USD/BRL is correlating to the broad Forex market as USD centric strength has been seen since the middle of last week, this as behavioral sentiment became a bit more anxious regarding the Iranian situation and its effect on global inflation.
Yes, the USD/BRL still remains within the long-term lower price realm of its trading, the lows seen up until Wednesday of last week when the 4.9000 vicinity was being challenged are certainly in the minds of speculators. The overall ability of the USD/BRL to track lower has been a powerful technical ride and one that day traders hopefully have been able to take advantage, but the coming near-term does look a bit cloudy.
Lack of Short-Term Clarity as Outlooks Shift
The USD/BRL has seen a shift in trading conditions the past handful of days as financial institutions are clearly bracing for the potential of inflation starting to become problematic. Technical traders of the USD/BRL may not want to hear about this, but U.S bond yields climbing on the 10 year Treasuries are starting to make investors nervous. The USD has gained on the heels of risk appetite fading.
The ability of the USD/BRL to sustain prices above the 5.000 level is important psychologically. The USD/BRL did trade below the realm for nearly a month. Since penetrating the 5.0000 mark upwards on Wednesday of last week the USD/BRL has not only produced a high around 5.0800 this past Friday, but also been choppy. The opening of the USD/BRL needs to be given respect as usual because of it capability to inflict a surge.
Near-Term Conditions and Opportunities
Forex is never a one way road intraday. The USD/BRL has climbed and shown that outlook has suddenly taken on a less than positive sentiment.
Having said this, the USD/BRL has not boomed to bizarre highs, it does remain within a lower mid-term realm.
Financial institutions will likely remain nervous in the near-term as a lack of clarity pervades global Forex due to concerns about inflation globally.
Day traders of the USD/BRL may find opportunities within the higher price range being seen, but betting on a sudden and decisive move downwards is likely an overconfident perspective for the near-term.
If financial institutions believe the U.S Fed is being put into a position in which interest rates may have to climb a bit, then the USD/BRL may continue to test higher realms incrementally today and into tomorrow.
Positive impetus will be needed to shift cautious attitudes in financial institutions which have become risk averse the past handful of days.
Brazilian Real Short Term Outlook:
Current Resistance: 5.0580
Current Support: 5.0410
High Target: 5.0850
Low Target: 5.0070