The USD/BRL will open its trading today within still lofty values, taking into account recent risk events which still have a lot of room for speculative interpretation.
- The closing price of nearly 5.7550 in the USD/BRL yesterday will be tested quickly. U.S financial institutions were absent from trading yesterday because of the Veterans Day holiday.
- The USD/BRL was essentially left to trade under the power of Brazilian financial institutions which certainly remain anxious due to the U.S election results which have put President-elect Trump onto a path of possible collision with Lula da Silva.
- The USD/BRL touched the 5.8650 vicinity upon opening last Wednesday when the U.S election result was known.
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Before the spike upwards last Wednesday, the USD/BRL had closed near the 5.7520 mark before the U.S election. This price and today’s opening price are very close to one another and perhaps an indication that financial institutions see this as an equilibrium. However, the highs seen in the aftermath of the U.S election do show the potential of apex realms if nervousness resumes.
U.S Federal Reserve and Economic Data
The USD/BRL has been under the shadow of fiscal concerns via Brazil’s left leaning government which has led to a strong bullish run this year. The election of Donald Trump is not going to help this outlook. However, U.S Federal Reserve policy did remain cautiously dovish last Thursday and another interest rate cut of 0.25 was produced. Tomorrow’s inflation data via the U.S Consumer Price Index will be important, but its affect on the USD/BRL may be muted.
The USD/BRL does trade in a correlation to large risk events from the U.S, but the Brazilian Real is also clearly suffering a loss in value due to concerns financial institutions have in the Brazilian government. This bullish trend in the USD/BRL may find opportunities to reverse lower, but looking for a sustained drop in value over the mid-term may prove to be wishful thinking. Short and near-term speculators will likely have to continue to look for quick hitting wagers which seek to take advantage of technical forces when they are perceived.
Today and Tomorrow in the USD/BRL
Retail traders in the USD/BRL should brace for the return of U.S financial institutions. Yesterday’s trading did produce a decline from the 5.8170 vicinity to a close of 5.7550. Support levels in the USD/BRL may prove attractive for short-term considerations and the 5.7250 area may prove to be a target that could see some action. But traders need to be careful and practice risk management.
Conditions in the USD/BRL pair over the next couple of days will not only see an influx of transactions via U.S banking involvement, but the inflation data from the U.S will provide impetus.
Support levels should be watched carefully, if they prove durable between 5.7250 and 5.7050 this could be an indication financial institutions are still worried about more bullishness in the USD/BRL developing mid-term.
Brazilian Real Short Term Outlook:
Current Resistance: 5.7610
Current Support: 5.7490
High Target: 5.7920
Low Target: 5.7250
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