Price action in the USD/BRL on Friday and Monday flirted with values seen in August and September, as financial institutions again have shown more nervousness with the Brazilian Real.
After touching lows around the 5.42200 vicinity on Monday of last week the USD/BRL began to incrementally trade upwards. Upon yesterday’s close the USD/BRL was near the 5.5962 realm. The currency pair was trading near the 5.6550 ratio on Friday and yesterday. After showing signs of correlating a bit with the broad Forex market since the middle of September, the USD/BRL has taken on a life of its own the past few days.
Yes, the USD has been rather volatile on its own. USD centric choppiness has been produced in global Forex the past week as financial institutions around the world try to navigate their cautious outlooks. However, on Friday before going into the weekend, the Workers Party of Brazil which is led by Lula da Silva publicly said it is putting together a proposal which could alter income taxation. Talk regarding the proposals which will certainly try to tax top earners more and provide relief to workers who earn less is creating more nervousness in Brazilian financial institutions.
USD/BRL Near-Term Realms and Mid-Term Concerns
The higher price action achieved in the USD/BRL which started to unfold on Wednesday with velocity saw the currency pair go from around the 5.5350 mark and start to challenge the 5.6000 level. Thursday and Friday’s sustained higher momentum did not experience a strong reversal lower, and in fact the USD/BRL began to come within sight of highs seen in September and August.
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The USD/BRL traded near the 5.6500 realm Friday and yesterday, and from the end of August into the second week of September it provided a fairly steady resistance level too. Yes, there were lower movements during this duration, but resistance essentially was created near 5.6500 and 5.6600 depending on the bids and asks from traders. Yesterday, many U.S financial institutions were on a banking holiday, thus volumes were lighter than normal.
Today’s Opening and Short-Term Concerns in the USD/BRL
The U.S will release Retail Sales data this coming Thursday. The U.S inflation numbers produced on Friday of last week came in lower than expected via the broad monthly PPI results. However, the USD/BRL remained rather firm and stayed within sight of highs. The U.S data may not affect the USD/BRL exchange rate forecast significantly if financial institutions worry about Brazilian domestic policies.
- The notion the USD/BRL is trading comfortably above the 5.5000 level should make bearish traders a bit worried if they are trying to step in front of the trend higher and fight upwards sentiment in the short-term.
- Today’s opening will prove interesting as volumes show an increase compared to yesterday’s trading.
- Traders may want to consider buying positions in the near-term that are ignited when the USD/BRL moves slightly lower.
Brazilian Real Short Term Outlook:
Current Resistance: 5.5990
Current Support: 5.5920
High Target: 5.6510
Low Target: 5.5390
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