The USD/BRL has achieved downwards momentum since touching a high of nearly 5.5970 on Thursday of last week, but yesterday’s trading once again started to demonstrate support abounds.
The USD/BRL pair closed Monday’s trading near the 5.4960 ratio. A low around the 5.4715 vicinity was seen earlier in the day. On Thursday of last week the USD/BRL was trading near the 5.5970 ratio, but on Friday the currency pair enjoyed a rapid decline in the wake of U.S Fed Chairman Jerome Powell’s more dovish sounding rhetoric regarding the U.S Federal Funds Rate. But before USD/BRL sellers get overly excited they have other considerations to confront.
The USD/BRL remains in the upper limits of its long-term range. The Brazilian Real has not been correlating in a friendly way with the broad Forex market for a while, this as the Workers Party led by Lula da Silva argues publicly with the Brazilian Central Bank. This past Saturday in the U.S Roberto Campos-Neto made his stance loud and clear regarding the excessive spending of the Brazilian government. Campos-Neto is the head of the Brazilian Central Bank and essentially pleaded for fiscal responsibility from governments at the Jackson Hole Symposium hosted by the Kansas City Fed.
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USD/BRL Sustained Values Yesterday and Support Consideration
Yesterday’s trading in the USD/BRL ran into support rather quickly and the move lower which some speculators may have been anticipating did not occur with any momentum. Instead the USD/BRL essentially performed a rather tight price range on Monday and closed within sight of the 5.5000 ratio.
While some USD/BRL trades may want to believe the currency pair remains overbought considering the weakness the USD has displayed in the broad Forex market, it is clear financial institutions remain nervous about the status of debate raging between the Brazilian government and its central bank. Short-term trading in the USD/BRL will be rather intriguing considering the USD did selloff rapidly last week against many major currencies.
USD/BRL Conflict via Current Pricing and Sentiment
There is the notion that perhaps the selling in the USD was a bit too strong. While Jerome Powell certainly stated the Fed needs to cut interest rates, the mid-term doesn’t equal long-term outlook. In other words, while a rate cut of about 0.50% has likely been priced into the USD, more impetus is needed to create further bearish USD centric sentiment.
- And the question for USD/BRL traders may come down to if the USD has sold off too much in the short-term, and the concerns financial institutions have about Brazil regarding fiscal policy, which may keep the USD/BRL bullish.
- The USD will release a Consumer Sentiment report today. Thursday will see important growth numbers from the U.S GDP.
- The 5.5000 ratio in the USD/BRL appears to be an important barometer which will be tested today and tomorrow.
Brazilian Real Short Term Outlook:
Current Resistance: 5.5010
Current Support: 5.4910
High Target: 5.5350
Low Target: 5.4790
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