The USD/BRL closed yesterday’s trading near the 5.1615 ratio which could be considered within its higher near-term realm, but also continued to exhibit a rather steady dose of choppiness as Forex remains anxious.
Yesterday’s finish in the USD/BRL near 5.1615 correlated to the broad Forex markets which continues to produce a wide array of nervousness. The return of U.S financial institutions in greater numbers on Tuesday following a long holiday weekend may have played an influence in the choppy conditions, but the Forex market globally the past handful of weeks has not been a place of calm.
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Just when some day traders might have believed that tranquil notions would equate into potentially solid trends to pursue, the broad Forex market was hit again by nervousness generated via U.S equity turmoil. The USD/BRL did see a high of almost 5.1675 yesterday before reversing lower to its closing range.
USD/BRL Speculative Pursuit Amidst Anxiousness
Many speculators may believe the USD/BRL remains in overbought territory and they may be proven correct over time, but for the moment selling the currency pair based on a stubborn belief could prove expensive. The broad Forex market continues to show USD centric strength develop as large players continue to be rather unsure about their risk appetite and choppiness has been a definite feature for speculators.
While conditions globally appear to be better considering lower energy costs and inflation pressures may be subsiding, knock-on effects via rather volatile conditions in U.S stock indices and its corresponding effect on U.S government bond yields is playing a role in the broad Forex market. Financial institutions in Brazil may feel somewhat comfortable, but the higher USD/BRL is demonstrating nervousness remains.
5.1500 to 5.17000 Range as a Key Barometer
The ability of the USD/BRL to remain below the 5.1700 realm yesterday however may be a significant signal. Prior to the U.S Independence Day holiday which enjoyed a banking holiday on Friday in the U.S and produced light trading this Monday, the USD/BRL did not challenge earlier highs seen last Thursday and Friday. The lower realms produced on Monday and early yesterday may be a telltale sign regarding where larger players are leaning.
Though there was a jump higher in trading yesterday late, the USD/BRL did creep lower and challenged the 5.1600 ratio again.
If the 5.1640 to 5.1560 realms prove durable as resistance short and near-term, this could mean pressure will develop lower again.
However, for a stronger move downwards it seems likely that not only do financial institutions have to feel the USD/BRL has been overbought, but U.S equities may have to behave as well.
Until global market sentiment returns to a more tranquil state in stock indices, USD centric strength may flourish periodically.
Brazilian Real Short Term Outlook:
Current Resistance: 5.1650
Current Support: 5.1600
High Target: 5.1720
Low Target: 5.1460
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