The USD/BRL has traded lower in a strong fashion since Friday of last week, when the 5.8000 level was proven vulnerable and sustained selling became amplified as the currency pair correlated to the broad Forex markets.
The USD/BRL closed yesterday’s trading near the 5.6850 ratio, which is a solid difference compared to the 5.8300 level the currency pair was traversing at the start of trading last Thursday. The selloff in the USD/BRL has shown solid price velocity lower as financial institutions have certainly shown a capability to mirror downwards pressure on the USD seen across Forex in recent days.
Selling of the USD/BRL going into last weekend was fast and sustained challenges lower. The ability to remain within lower territory yesterday and close within depths seen last in the first week of November 2024 is intriguing. Monday’s low was around the 5.6675 ratio. Day traders of the USD/BRL will have their sentiment tested today and tomorrow as they continue to try and gamble on the existing bearish sentiment being seen across Forex against the USD.
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Risk Appetite and Speculative Trading in the USD/BRL
There are certainly still concerns regarding the Brazilian government’s fiscal policies. However, risk appetite has shown a strong surge higher since Friday in the broad financial markets. The question is if this momentum can be sustained or is it price action which will run of power soon. The U.S Federal Reserve will release its interest rate policy statement tomorrow. No change is expected to the Federal Funds Rate, but this has already been factored into the USD/BRL.
What financial institutions dealing with the Brazilian Real want to see is that global traders are continuing to display more relaxed attitudes regarding President Trump and his tough stance on tariffs. The hope that negotiations regarding trade will try to find mutually good results is a definite goal, but not a guaranteed outcome. The USD/BRL has been able to move lower in a fast manner, the question is if sustained power downwards will continue to be seen.
The 5.7000 Ratio as Resistance in the USD/BRL Near-Term
While traders are optimistic naturally and may believe all will be good in the end, it is important to always keep risks within consideration. The lower move in the USD/BRL has been able to achieve values below the 5.7000 level, which will now become a focal point for traders. In fact the opening of the USD/BRL should be watched today to see if the 5.7000 can continue to work as a resistance level.
- If the USD/BRL maintains value lower today and goes into tomorrow’s Fed FOMC Statement relatively calm, attention will then turn to President Trump and his reaction to the Fed’s cautious approach.
- Traders may have ambition of seeing a lower USD/BRL price range develop between 5.6000 and 5.0500, but they should not get overly confident.
- The use of quick hitting trades seeking limited results that cash out fast profits and do not let open trades linger might be wise over the near-term as the Fed and President Trump loom.
Brazilian Real Short Term Outlook:
Current Resistance: 5.6920
Current Support: 5.6810
High Target: 5.7120
Low Target: 5.6660
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