The USD/BRL is traversing values last seen in October of 2024, this as the currency pair closed near the 5.5727 price yesterday. Short-term traders have a lot to consider regarding pursuit of the Brazilian Real.
Another burst of selling has propelled the USD/BRL to fresh lows. The USD/BRL closed near the 5.5727 mark on Tuesday, which is a value last seen in the middle of October 2024. The emergence of a lower price realm in the currency pair however must be given careful consideration by day traders hoping to profit from a perceived bearish trend. Yesterday lows tested the 5.5500 to 5.5460 ratios for a brief time.
On the 3rd of April the USD/BRL actually touched the 5.5850 vicinity. Yes, the currency pair sky rocketed in the proceeding days, and on the 10th of April the USD/BRL was touching the 5.9600 ratio momentarily. Tariff concerns certainly fed into the volatility for the sudden thrust upwards in April, and now traders have to consider why the USD/BRL has moved lower.
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Downturn in the USD/BRL Reasons
The emergence of fresh lows and a retest of October prices is not because the Brazilian government led by Lula da Silva is being seen in a positive light. In fact, fiscal concerns regarding over-spending by the Brazilian government, high inflation and a slowing economy are creating escalating concerns in financial institutions. It is the weakness of the USD that has driven the USD/BRL lower.
It is good that the Brazilian Real is still correlating to the broad Forex market, but day traders are kindly reminded not to get overly excited about the bearish momentum generated recently. Consideration that the U.S Fed may be forced to admit they need to cut interest rates may be propelling selling of the USD. The U.S will release Consumer Price Index data today, tomorrow PPI inflation statistics will be published. Lower U.S inflation could help solidify USD moves lower near-term.
Concerns in Brazil and the Shadow of Support Levels
Yes, it is significant the USD/BRL has broken below the 5.6000 realm, sustained lower price action since last Friday is a solid result for the Brazilian Real. However, now that the currency pair is trading near values last seen in October, financial institutions may once again begin to wonder about fair market value for the USD/BRL, this while they have a significant amount of economic concerns regarding Brazil and its government.
- Day traders should be careful around the current price values and long-term charts will be needed to consider the USD/BRL landscape.
- Lows around the 5.4000 mark from the middle of July until early October were seen in the USD/BRL in 2024.
- Confident traders may believe this can happen again, but they should trade carefully and not indulge in overly ambitious targets.
- Attempts to try and take advantage of USD weakness is legitimate, but caution is needed.
Brazilian Real Short Term Outlook:
Current Resistance: 5.5790
Current Support: 5.5680
High Target: 5.6020
Low Target: 5.5390
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