The USD/BRL has consistently challenged support levels in the short term. While it has not seen a breakout lower, its solid incremental bearish trend is evident and speculators may have an opportunity to take advantage of the Brazilian Real if the USD/BLR produces more downward momentum.
Resistance levels in the USD/BRL have also been decreasing in the short term. The lack of volatility in the forex pair is not a guarantee that a sudden spike will not happen, but traders should be able to take comfort in the belief that the lack of choppy trading could prove a fertile ground to find opportunities near term. Resistance around the 5.3500 level appears capable for traders to use as a stop loss if they want to pursue selling positions.
Global risk appetite once again showed some strength yesterday as US equity indices did well and the Ibovespa of Brazil also produced solid gains. While stocks in Asia have turned in mixed results early this morning, calls on the future markets from the US indicate the American exchanges will start the day on a positive note. Speculators within the USD/BRL may have reason to suspect that if equity indices continue to track upwards that it will help create more optimism for the Brazilian Real.
However, traders must also be alert to the current support levels of the USD/BRL which have proved solid and hard to breakthrough. Speculative positions seeking further downside momentum will be wagering on the USD/BRL to essentially vanquish what has proven to be strong support, because while the USD/BRL has been certainly challenging support levels, it has been doing this with incremental moves downward and not with strong spikes. The 5.2600 juncture has proven durable and traders looking for a breakout which targets values near the level of 5.2000 and lower should understand the last time these bearish values were tested was essentially the last week in July.
Speculators need to gauge risk-reward when trading the USD/BRL. While support has certainly proven difficult to puncture the past month, the forex pair has also produced a bearish trend as resistance levels have decreased too. If resistance levels continue to produce adequate protection against sudden moves higher, selling the USD/BRL may prove the right speculative trade near term. Selling near the 5.2800 to 5.3000 levels and seeking a downward movement may prove the logical decision.
Brazilian Real Short Term Outlook:
Current Resistance: 5.3500
Current Support: 5.2500
High Target: 5.4000
Low Target: 5.1300
