The Brazilian Real is traversing next to important resistance levels. The middle of last week saw a slight bullish run higher and has sustained trading near important price junctures which are likely acting as key a psychological inflection ground for the USD/BRL. Speculators may be skeptical of the loss of value within the Brazilian Real which has incrementally occurred the past month as the USD/BRL has crept up on bullish momentum, but technical charts are not lying and it is certain fundamental economic factors in Brazil are causing headwinds for its domestic curreny.
The US election will likely have a volatile effect on the USD/BRL later today and tomorrow. The tight range bound motion of the forex pair is certain to see a dose of volatility emerge over the next twenty-four hours and short-term results will have to be carefully contemplated. The notion the Brazilian government and current US administration have a good working relationship likely helps the USD/BRL remain within in a stable range even though Brazil faces tough economic conditions and a troublesome fiscal outlook.
The question speculators need to consider is what will happen if Joe Biden wins the election. Clearly Brazil and the US will maintain a solid relationship, but philosophically a Biden-led White House may have an impact on President Bolsonaro which could be detrimental. A Trump victory would likely help Bolsonaro short-term. The USD/BRL should be watched closely because the extremely tight range of the forex pair could be a product of cautious trading by financial institutions which are taking a wait-and-see approach.
Short-term speculators may want to be long the USD/BRL and look for potential upside price action. The resistance level of 5.8000 should be watched closely; if this juncture is broken higher the USD/BRL could have room to move upwards. If a Joe Biden victory takes place, resistance levels may become vulnerable short-term until reversals develop later.
Traders will need to monitor their positions carefully the next twenty-four hours and evaluate the results of the US election. The tight range of the USD/BRL is certain to be affected over the next two days. The notion the forex pair has been hovering near important resistance for a week suggests it may be ready to break out higher. However, speculators need to keep in mind that a Trump victory could help sooth USD/BRL momentum and reignite bearish moves short term.
Brazilian Real Short Term Outlook:
Current Resistance: 5.8000
Current Support: 5.7000
High Target: 6.0000
Low Target: 5.6500
