The USD/BRL has consolidated further the past day of trading and appears ready for more tests of short term support and resistance levels which have produced a tight range. The 5.3000 continues to act as an important inflection point for the USD/BRL as it provides a magnate like an effect on the current price action. A sustained challenge below the 5.3000 level has been difficult to sustain, but intriguingly resistance levels have incrementally decreased the past two trading sessions.
Risk appetite is fragile as investors still wait for more evidence that positive sentiment will return to the global markets. Yesterday’s gains on the US equity indices helped sentiment, but one day of gains after three strong days of selling may need more positive ammunition before investors and speculators feel safe to pursue and become believers again. Early calls on the future markets in the US indicate that some selling may be prevalent early but this could easily change. The Ibovespa of Brazil did put in polite gains yesterday too.
The USD/BRL has seen a sustained bearish trend emerge since the 20th of August. Even in the midst of risk-averse trading the past week, the USD/BRL has not experienced what can be called a great deal of volatility. The resistance level of 5.400 has proven to be capable since early September and traders may believe the 5.3800 mark now may act as a rather capable resistance juncture.
The current price action of the USD/BRL has produced a tight range between 5.2800 and 5.3300 in the past day of trading. Speculators who believe risk appetite will reemerge and the USD/BRL will react with increased optimism may want to be sellers of the forex pair. Shorting the USD/BRL with limit orders between the 5.3200 and 5.3500 could prove worthwhile and there appears to an opportunity to use tight stop losses.
Brazil Real has been an interesting barometer regarding risk appetite and the implications of coronavirus on global economics. The USD/BRL has experienced a whirlwind of choppy trading mid-term and has seen its price range reflect this rollercoaster. However, the past few weeks have seen a steady bearish trend re-emerge and the USD/BRL test and break support levels consistently. Traders may continue to seek selling positions and look for these support levels to be challenged short term.
Brazilian Real Short Term Outlook:
Current Resistance: 5.3800
Current Support: 5.2700
High Target: 5.4300
Low Target: 5.1300
