The USD/BRL has left behind the higher realms it nervously challenged early last week and has fought lower in choppy conditions while finishing yesterday’s trading around the 5.1238 mark.
After touching higher realms last week the USD/BRL has fought lower amidst choppy conditions and closed around the 5.1238 mark on Tuesday. Trading has certainly not been a one way street for speculators who are likely feeling a bad case of whiplash via their results if risk management has not been used. After touching a low on exuberant selling on Monday via a gap upon opening, the USD/BRL did move below the 5.0700 ratio briefly.
Trading has remained volatile in the USD/BRL for the better part of a week and a half, the velocity being displayed in the currency pair should serve as a warning sign. The Brazilian economy has grown somewhat over the past quarter, but is still suffering from problematic inflation. Interest rates in Brazil remain high and a national election is coming in a handful of months. Yet, in many ways the Brazilian Real is still heavily correlated to price action via USD centric sentiment.
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Spotlight on the U.S Federal Reserve Later Today
The U.S Fed will announce their Federal Funds Rate later today and many financial institutions have turned cautious before the FOMC announcement. Inflation from the U.S is higher because of rising energy costs, but the new Fed Chaiman Kevin Warsh and other Fed voting members might decide to believe energy costs will ease over the coming months and allow them to keep interest rates in place for now as a trial period. The USD/BRL will react before and after the Fed makes its policy decision public.
The ability of the USD/BRL to remain within it lower near-term range and stay in sight of lower depths after having flirted with them earlier this week allows for the notion more selling could ignite. Speculators of the USD/BRL however should note that financial institutions seem to be waiting for a bit more impetus before they return to their bearish sentiment.
Choppy and Expensive Decisions for Wrong Bets
Volumes in the USD/BRL remain rather low compared to many major currency pairs. This continues to keep the currency pair’s trading limited to opening and closing hours each day instead of continuous trading.
- Openings on the USD/BRL are dangerous and if a speculator finds themselves on the wrong side of early momentum then the wagers can turn into expensive losses, particularly if leverage is being mismanaged.
- The USD/BRL does look like it may be overbought, but financial institutions will likely want to see the U.S Fed keep its interest rate in place today and avoid more rhetoric from the White House regarding tariffs.
- Day traders wanting to bet on lower USD/BRL values need to avoid the Fed’s announcement window to stay away from volatile fluctuations which can harm smaller accounts.
Brazilian Real Short Term Outlook:
Current Resistance: 5.1265
Current Support: 5.1210
High Target: 5.1450
Low Target: 5.0830
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