The USD/BRL will open its trading within eyesight of 5.5000 today, this after experiencing a buying trend the past handful of days after exploring lows around the 5.3800 realm on Friday.
First of all the USD/BRL remains within the lower elements of its long-term technical range. Even the mid-term must be looked at as an accomplishment for the USD/BRL and its ability to traverse lower. Last week’s trend lower touched the 5.3810 ratio on Friday which was a rather intriguing depth for the USD/BRL as it flirted with values seen in June of 2024.
Yes, the USD/BRL has experienced buying the past few days and yesterday’s close around the 5.4990 ratio will certainly cause some thinking about the potential of the 5.5000 level being challenged in the short-term. However, the USD/BRL remains in a healthy correlation with the broad Forex market. Many major currencies have experienced some weakness against the USD in recent days.
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Not Necessarily A Shift in Outlook Sentiment
The move higher in the USD/BRL the past couple of days could be said to have demonstrated velocity, but financial institutions are likely simply being cautious and are not acting in panic. The notion that the USD had been oversold last week has taken hold, but the reactionary buying of the USD the past two days has not been violent. Cautious attitudes are the primary reason for the slight movement higher. Equilibrium tests are certain to be seen the remainder of the week in the USD/BRL and other major currency pairs.
Today and the remainder of the week are important for the Federal Reserve. A slew of FOMC members will be speaking today and the Fed’s Jackson Hole Symposium gets officially underway tomorrow and lasts into the weekend. The Fed is going to cut its interest rate in September, but the big question now is how much gusto will the Fed members show regarding additional rate cuts to come? The USD/BRL trading within a correlation to the broad Forex market is a good sign the Brazilian Real is actually stable.
5.5000 Now an Inflection Point Short-Term
Traders of the USD/BRL may find an opportunity to take advantage of short-term trends, but as the currency pair lingers near 5.5000 it may become a speculative playground and a bit dangerous. Some traders may believe that mid-term outlooks remain negative about the USD.
- But if financial institutions believe that for the moment the best policy is to maintain equilibrium and wait for further guidance from the Fed speeches starting today and into the next two days, choppy conditions may be seen.
- Meaning that 5.5000 may become a magnet of sorts until clarity is delivered.
- Short quick hitting wagers may be the best tactic, but traders should be careful not to let the market get too far away from them via sudden moves.
- While it may seem logical to believe the USD/BRL should be slightly lower, caution may keep the USD/BRL within slightly higher realms near-term if large players do not hear what they want from the Fed.
Brazilian Real Short Term Outlook:
Current Resistance: 5.5040
Current Support: 5.4930
High Target: 5.5280
Low Target: 5.4540
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