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USD/BRL: Short Term Momentum Encouraging Bear Sellers

By Robert Petrucci
Robert Petrucci
By Robert Petrucci
Robert Petrucci has worked in the Forex, commodity, and financial profession since 1993. Important aspects of his work involve risk analysis and advisory services. As an advisor in a Family Office he maintains a conservative approach for wealth management and investments. Robert also works in private finance with investors and companies delivering financial and management services.

Early August produced plenty of bullish movement for the USD/BRL, but since the 20th of August a bearish cycle has emerged.

The past week of trading for the USD/BRL has seen a bearish cycle emerge. There is no denying when August began a solid bull run upwards developed for the USD/BRL. After hitting values near the 5.0800 to 5.1000 the last week of July, the Brazilian Real began to see an erosion of value transpire as the USD/BRL reversed higher, eventually testing high watermarks 5.6800 on the 20th of August.

However, what intrigued speculators about the bullish run upwards late July and this August was that support levels continued to look vulnerable even as the forex pair traversed higher. Since hitting a value of nearly 4.8300 around the 10th of June, the USD/BRL has produced a fairly incremental run higher on solid buying. There is a red flag waving for speculators today though, and a critical inflection point is being tested now.

The current price vicinity of the USD/BRL is near the 5.3800 juncture. The range of 5.3400 to 5.4000 is important because it has proven rather tough to break downwards since the first week in August. Early trading this morning has shown support begin to be tested again after the previous two trading sessions sparked renewed bearish momentum. So is another reversal higher going to take place now?

The range of the USD/BRL will intrigue speculators because this level has proven tough to break recently, but as global risk appetite shows no signs of relenting short term traders may ask if now is the time the bearish trend will be reestablished with a further push downwards. In late July the USD/BRL moved within the 5.1000 to 5.2000 range, before succumbing to bullish sentiment. Speculators may be tempted to believe selling momentum may continue to build near the current price action of 5.3700 to 5.4000 and produce another leg down for the USD/BRL based on the assumption investor sentiment is optimistic globally and that the late July marks can be tested again.

Selling the USD/BRL within its current price levels and using a stop loss near the 5.5100 level may prove an opportunistic trade. After producing choppy trading the past month and actually seeing a bullish trend dominate, the USD/BRL appears ready to demonstrate stronger bearish momentum. If the 5.3400 support level falters and selling grows the level of 5.2200 may be targeted by speculators.

Brazilian Real Short Term Outlook:

Current Resistance: 5.5100

Current Support: 5.3400

High Target: 5.6400

Low Target: 5.2200

USD/BRL

Robert Petrucci
By Robert Petrucci
Robert Petrucci has worked in the Forex, commodity, and financial profession since 1993. Important aspects of his work involve risk analysis and advisory services. As an advisor in a Family Office he maintains a conservative approach for wealth management and investments. Robert also works in private finance with investors and companies delivering financial and management services.

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