The ability of the USD/BRL to consistently trade near resistance levels since late September has allowed a speculative dance to test downward cycles which have had a habit of developing within the natural progression of forex. The Brazilian Real remains within the weaker boundaries of its mid-term value range, but also continues to offer a tempting speculative opportunity for traders who believe bullish momentum is consistently running into adequate resistance.
As of this morning the USD/BRL is trading near the 5.5300 juncture while fairly strong resistance appears to be the 5.6000 level. Certainly this value above could prove vulnerable and the USD/BLR could trade higher, but from a risk reward speculative perspective choosing to sell the USD against the Brazilian Dollar within these current ratios appears justifiable.
Brazil does continue to struggle with coronavirus implications, but worldwide a surge in cases also is making news so while investors may feel uneasy about Brazil’s conditions there is plenty of reason to feel concern regarding all nations, in other words Brazil is not alone in this battle. Investors do not like the unknown, and while coronavirus remains a riddle that is hard to quantify, it seems likely Brazil will find a way like all other nations to work around the shadows the virus causes economically. What is the choice? The USD/BRL remains technically a forex pair which has struggled and not recovered what could be deemed equilibrium of value. Yes, that is a subjective thought, but traders need to consider this as a piece of information regarding potential trends within the USD/BRL.
Short term the USD/BRL also looks like it may have more room to flirt with lower support. Incrementally resistance levels have lowered the past few trading sessions and this ability may give speculators ammunition to make decisions. Global risk appetite also appears steady and optimistic for the near term, and traders looking to capitalize on positive trading sentiment may use this as justification too when looking at technical charts.
Selling the USD/BRL within a price vicinity of 5.5000 to 5.5500 and looking for downside action is attractive short term. Stop loss limit orders can be placed in a conservative manner within a close proximity and speculators should be ready for quick trades, meaning they should not be too greedy. If you have profits from selling the USD/BRL it may prove wise to case them in, be patient and allow the market to once again retrace higher while the Brazilian Real practices it current range dance in order to trade again.
Brazilian Real Short Term Outlook:
Current Resistance: 5.6000
Current Support: 5.4900
High Target: 5.6500
Low Target: 5.4500
