The USD/BRL closed near the 5.9115 ratio yesterday as financial institutions traded the currency pair within a tight range as caution provided a less volatile Forex environment momentarily.
Last Thursday’s trading in the USD/BRL saw a close of nearly 5.63000 as financial institutions seemingly ended the day with an optimistic posture. However, on Friday the USD/BRL gapped higher and finished trading going into the weekend near the 5.8450 vicinity, this as risk adverse buying of the currency pair escalated.
Yesterday’s trading in the USD/BRL produced another day of volatile results early, but cautious trading began to take hold as financial institutions seemingly await the next big dose of impetus into the broad markets. U.S equity indices became less violent towards the end of Monday, and Asian markets have produced some cautious buying early on today. The USD/BRL has correlated to the broad Forex market, particularly among emerging market currencies.
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Behavioral Sentiment and Influences from Afar
Because Brazil’s biggest trading partner is China, the USD/BRL may see some knock on effect from financial institutions which weigh value considerations coming from the open disagreement between the U.S and China. Yes, South America including Brazil faces tariffs from the U.S, but the brunt of highest sanctions are directed at China. The Chinese Yuan has begun to fluctuate in Forex as China’s government clearly is sending the U.S a warning that it could intervene in the value of the USD/CNY – this by making the Yuan weaker.
A weaker Chinese Yuan could factor into the USD/BRL considerations via financial institutions. However, before traders bet blindly on this consideration, they should note that the USD/BRL doesn’t have a lot of volume compared to the biggest currency pairs, and that China and the U.S negotiations, while loud may prove to find a resolution. The near-term certainly will remain filled with rhetoric, the USD/BRL may react to verbal storms, particularly if risk adverse trading overtakes the global markets again near-term.
Higher Range and Consideration of Resistance in the USD/BRL
The USD/BRL is within the higher elements of its mid-term range via a three month technical look. Yet, the USD/BRL traded above the 6.0000 level from the start of December until late into January with a rather consistent value range. Resistance should be watched by traders.
- Some speculators may believe the USD/BRL is overbought at its current prices, but the measurement for nervous behavioral sentiment is hard to define near-term.
- The 5.9000 level should be watched short-term, if this ratio is able to see sustained trading above the mark it may signal financial institutions remain cautious and are leaning into negative outlooks for the time being.
- The Forex market including the USD/BRL can still produce volatile price action over the next few days and traders need to remain conservative as tariff developments continue to cause reactions.
Brazilian Real Short Term Outlook:
Current Resistance: 5.9350
Current Support: 5.9010
High Target: 5.9680
Low Target: 5.8870
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