The USD/BRL has turned in rather curious trading the past couple of days after touching lower values on Thursday, the currency pair has moved back to higher realms.
- Nervousness regarding the Brazilian Real continues to be seen via the speculative price action of technical charts which reflects the behavioral sentiment of financial institutions.
- The USD/BRL closed yesterday’s trading near the 5.4480 ratio which is back within the higher element of the currency pair’s near-term price range.
After U.S inflation data via the Consumer Price Index produced weaker than expected numbers, the USD/BRL did correlate to the broad Forex market and traded lower. The USD/BRL touched the 5.3697 mark briefly on Thursday, but curiously the currency pair had already touched the 5.3725 mark on Wednesday. Meaning the USD/BRL while creating a new low on Thursday didn’t really show a great amount of difference compared to the downwards drop seen the previous day, this before U.S inflation data was known.
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Nervous Financial Institutions in Brazil and the USD/BRL
After touching the lows on last Thursday, the USD/BRL actually began to climb higher and finished the day slightly below the 5.4400 ratio. On Friday of last week the USD/BRL moved slightly higher touching the 5.4657 vicinity as a high before going into the weekend near the 5.4300 level. The inability to sustain the lows created on Wednesday and Thursday of last week coupled with the notion the broad Forex market has seen mostly a weaker USD centric stance is noteworthy and points to nervousness in financial institutions in Brazil.
Upon opening for trading yesterday the USD/BRL gapped higher and touched a ratio of nearly 5.4760 before edging lower and closing near the already mentioned 5.4480 mark. Economic data from Brazil has begun to point to a slowing economy and Lula da Silva’s government will likely blame the Central Bank of Brazil for this because of higher interest rates being maintained. But because many major global economies are slowing this may not be correct due to decreasing demand for Brazilian product, and because inflation in Brazil remains problematic.
Near-Term Speculation and USD/BRL Reactions
Having essentially finished trading on Monday near marks the USD/BRL closed in proximity to last Thursday and Friday, means today’s opening should be watched intently to gauge sentiment. Yesterday’s gap higher is a sign nervous behavior is creating headwinds for bearish perspectives in the USD/BRL.
- The U.S will release important Retail Sales figures today, but because of the recent trading in the currency pair it has to be questioned how much of a reaction it will cause even if the U.S data is weaker than expected.
- While other major currencies have gained against the USD recently the USD/BRL remains in the higher elements of its realms and speculators need to be cautious.
Brazilian Real Short Term Outlook:
Current Resistance: 5.4500
Current Support: 5.4420
High Target: 5.4610
Low Target: 5.4375
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