The USD/BRL broke above the 5.5000 level yesterday. Finishing trading near 5.5088 the currency pair is now traversing values seen in the second week of October.
Volatility has infiltrated the USD/BRL since the 5th of December, and yesterday’s price action provided another day of fireworks. Financial institutions which have been showing confidence in the Brazilian Real since the second week of October have turned noticeably cautious regarding the USD/BRL. Price dynamics in the currency pair turned fast on Tuesday when the 5.4700 level became sustained and triggered additional buying late yesterday when the USD/BRL suddenly found itself over 5.5000.
Closing at highs which are touching values from the second week of October will prove worthwhile to monitor regarding opening sentiment for the USD/BRL today. Nervous conditions have been high in the currency pair, the U.S Fed’s FOMC policy decision last week sparked additional USD weakness in the broad Forex market, but the Brazilian Real has not correlated to many of the major currencies.
Nervousness Concerning Brazilian Growth
The Brazil GDP numbers reported more than a week ago seem to have caused worries in Brazilian financial institutions and outsiders that economic conditions in the nation are becoming difficult. Already facing rather high inflation, slower growth in Brazil is not a welcome combination. The USD/BRL has sustained values above the 5.4000 rather consistently since the 5th of December.
Yesterday’s ability to hit the 5.4500 ratio and incrementally fester upwards during the day certainly increased buying power in the USD/BRL. It will have to be seen upon today’s opening if the surge higher late yesterday came from a large player causing an imbalance in the marketplace which can be reversed early. Or if the USD/BRL is going to find the 5.5000 mark as a level that starts to become durable as support because of nervous financial institutions escalating a worrisome outlook for the Brazilian Real.
Near-Term and Holiday Trading Circumstances
After being able to move to important long-term lows as late as early December which challenged values not seen since June of 2024, the reversal higher in the USD/BRL back to mid-term technical resistance levels is speculatively intriguing.
- Day traders may be tempted to believe the worst of the buying surge has been digested into the USD/BRL, and the currency pair will start to correlate to the broad Forex market sooner rather than later.
- However, a conservative approach is advised for today’s opening, and cautious traders may want to watch the results from the first hour or so before dipping their toes into the USD/BRL.
- The 5.5000 level has seen downwards pushback in August, September and October, but there are no guarantees that a reversal lower must occur in the near-term.
- Speculators also need to remember that holiday trading will start to become lighter than normal as the holiday season approaches.
Brazilian Real Short Term Outlook:
Current Resistance: 5.5140
Current Support: 5.4990
High Target: 5.5390
Low Target: 5.4580
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