The USD/BRL did come off of apex highs during yesterday’s trading, but nervous speculative winds are blowing for the currency pair as political intrigue takes hold in Brazil.
- The USD/BRL pair touched a high of nearly 5.4820 yesterday before selling off and closing around the 5.4235 ratio.
- The opening of the USD/BRL needs to be watched for potential gaps and the direction that occurs, yesterday’s trading it should be remembered took place as the U.S celebrated a national holiday.
- The bullish surge of the USD/BRL is becoming pronounced and the Brazilian Real has seen weakness certainly emerge since late March.
The Central Bank of Brazil and President Lula da Silva are starting to bang heads against each other. Lula’s Workers Party is going to court and claiming that Robert Campos Neto, the head of the Brazilian central bank, is working against the ruling government when he makes political statements which appear to be in favor of a more conservative policy.
Behavioral Sentiment is Obviously Nervous in Brazil
Lula’s political troops claim that Neto is a proponent of the previous government and is working actively against the Workers Party ambitions of lowering interest rates. The selloff generated after yesterday’s high which touched values last seen in the first week of January 2023, may not ease nervous behavioral sentiment among financial institutions.
The bullish price action of the USD/BRL has become fast over the past three weeks as political tensions have started becoming filled with more open animosity regarding opposing economic viewpoints. Today’s opening will prove interesting particularly because of the potential reaction regarding the recent developments by U.S traders returning to their desks. The 5.4200 level will prove an interesting lynchpin and barometer when trading begins.
Support Ratios and Short-Term Reaction to USD/BRL Drama
Speculators who believe the USD/BRL is overbought and all things will return to sunshine and pleasant days for the Brazilian Real are warned to remain alert and not be overly optimistic. Traders with a particular bias towards political outlooks also need to monitor their own perspectives. The bullish trend of the USD/BRL is not happening in a vacuum, financial institutions have clearly become nervous regarding President Lula da Silva’s economic policy and his desire to forcibly make the Central Bank of Brazil agree to mandates.
- The USD/BRL has not correlated to the global currency market over the mid-term in many ways, and its bullish move needs to be treated with care.
- Yesterday’s selloff of the USD/BRL shows some financial institutions believed the higher values seen were likely an overreaction, but if support ratios prove durable between the 5.4200 and 5.4100 levels today, this could signal some buyers remain because of existing nervousness.
Brazilian Real Short Term Outlook:
Current Resistance: 5.4285
Current Support: 5.4180
High Target: 5.4650
Low Target: 5.4025
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