The USD/BRL has produced a rather tight value band the past week of trading as support and resistance levels have consolidated and proven adequate. The ability of the USD/BRL to demonstrate a narrow short-term range may be intriguing to speculators because of the ability the Brazilian real has recently shown to sustain its stronger values after enjoying a relatively stable bearish trend.
Global risk appetite remains steady in major equity indices, and this may also bolster speculative fever within the USD/BRL as the week begins. US future markets are indicating a negative opening for equities, but this may change quickly depending on developing news from the States regarding the potential for a newly initiated stimulus bill which could be approved by Congress. The Ibovespa of Brazil has also demonstrated a significant amount of gains the past month and investors may prove they want to remain in the stock markets.
Speculators need to take into consideration that the holiday season is approaching, and trading in Forex the next few weeks will sometimes produce rather volatile trading without prior notice. However, the USD/BRL has exhibited a clearly defined bearish trend and traders may be tempted to continue pursuing the downside momentum.
The ability of the USD/BRL to challenge support levels and prove them vulnerable since the end of October has gotten the attention of speculators. The 5.0000 level for the USD/BRL may be a key inflection point and certainly is being watched as an instrumental support level. As of this writing, the USD/BRL is hovering near the 5.1000 juncture, and current support of 5.0700 should be the focus. If this mark is punctured lower and trading is sustained below, it may begin to set off alarm bells for speculators who suspect the bearish trend can gain momentum.
Traders, however, in the short term, will need to practice patience. Yes, global risk appetite may be rather optimistic, but with the holidays quickly approaching, volumes may be light which could cause temporary choppy conditions. Speculators should use limit orders to capture trends while taking advantage of resistance and support levels near term, which may see the USD/BRL’s current short-term range remain rather consolidated.
Brazilian Real Short-Term Outlook:
- Current Resistance: 5.1300
- Current Support: 5.0700
- High Target: 5.1900
- Low Target: 4.9900
