The USD/BRL has provided day traders intriguing reversals the past two weeks. If this past week’s technical chart featured below were compared to the previous week of results, day traders could not be blamed for thinking they were the same two charts. However, even though the two recent technical charts may look eerily similar, the results in the USD/BRL are being influenced by a myriad of factors. Speculators of the currency pair may believe the current value offers an opportunity to consider bets today and tomorrow via the technical results.
Rate Cut and Election Season Continue to Shape Sentiment
Brazil’s Central Bank cut their interest rate by 0.25% early yesterday based on the notion inflation has eased in the nation. Yet, the central bank also warned that inflation is unstable and needs to be monitored and made no assurances that additional interest rate cuts would happen over the mid-term. The approaching October elections in Brazil are also factoring into the thinking of financial institutions as they consider which political party may be leading the nation in a handful of months.
The USD/BRL did see selling price action early this week, but incremental buying has festered the past couple of days. The results of the USD/BRL have given speculators an opportunity to try and ride momentum, but the path has not been an easy one. The near-term will offer interesting opportunities for those with technical and fundamental perspectives.
Top Regulated Brokers
USD/BRL Continues to Hold a Well-Defined Trading Range
The USD/BRL has practiced a well-defined technical range. The currency pair as of yesterday’s close was near the 5.1216 ratio. The USD/BRL touched a high around 5.1475 on Tuesday, but following the interest rate cut by the Brazilian Central Bank has seen a fairly steady level near its current lower value. Intraday trading continues to highlight quick changes of direction, but distinctively a cautious attitude by financial institutions has produced sideways price action too.
Trading results from the last two weeks look similar and a one month technical glance shows the USD/BRL in the middle of its range. However, resistance may prove to be durable near the 5.1300 mark if favorable global conditions regarding inflation outlooks prevail near-term. The de-escalation of military conflict in the Middle East may help large players also be more optimistic regarding outlooks which could spark some additional optimism. Retail traders need to remember the USD/BRL has limited volume and is prone to gaps upon openings and suffers sudden reversals.
Selling Interest Faces Limits Within a Choppy Range
Traders should not get overly ambitious regarding potential downside in the USD/BRL. If selling positions are pursued it is urged that targeted goals include take profit orders to cash out winning positions if they are achieved. The USD/BRL could also use a solid dose of upside in U.S equity indices which would limit investments into U.S Treasuries. Meaning if money is not going into U.S bonds and the U.S stock market is producing solid results the temptation to believe risk appetite will help the strength of the BRL is logical. Yet, the past couple of weeks results in the currency pair should serve as a warning that choppy conditions can prevail. Looking for support to come back into view via selling positions may feel correct, but not getting too confident regarding momentum remains important in the USD/BRL.
Equity Swings Tied to SpaceX Point to Resistance Risk
One of the good things about the USD/BRL is that lower volumes makes the trading of the currency pair more comfortable in some respects. However, traders using too much leverage can induce volatility in their trading accounts if they have too much exposure. While looking for downside in the USD/BRL at this moment might be tempting, if U.S equities were to have a negative day (SpaceX may cause volatility today) this could cause headwinds in the near-term. Technically the results from the past two weeks may look attractive for selling perspectives now, but caution is needed in case resistance above is suddenly proven vulnerable.
USD/BRL Positioning Reflects Shifting Dollar Sentiment
The broad Forex market has seen USD centric weakness emerge the past few days, but the selloff of the USD has run into headwinds. The USD/BRL has not correlated 100% to the broad Forex market because of the interest rate cut from the Brazilian Central Bank, and financial institutions may try to rebalance their positions today and tomorrow as they adapt to shifting outlooks depending on broad market influence.
USD/BRL Levels Traders Are Watching Right Now
Current Resistance: 5.1250
Current Support: 5.1160
High Target: 5.1410
Low Target: 5.0820
Ready to trade our analysis of the USD/BRL? Here is our list of the best Forex brokers in Brazil worth checking out.