Speculators who have grown wary of the consolidated range within the USD/BRL as it straddles a rather resilient value may want to take into consideration a coming risk event which could have a large effect on the Brazilian Real. Perhaps it is wishful thinking in order to try and create drama where little has been found recently, but the USD/BRL may be a forex pair which sees a real reaction to the outcome of the US presidential election which will be held next week.
The reason for this is via a behavioral sentiment perspective. US President Trump and Brazil President Bolsonaro are viewed by many analysts within the same political scope; some may even describe them as political allies who are confronted by a rabid disdain from their opponents. The outcome of next week’s US election is unknown, but a victory by Trump may bolster President Bolsonaro’s standing and a victory by Joe Biden may dampen the Brazilian leader’s prospects.
Technically the USD/BRL is within a tight consolidated range and can be described as testing resistance levels on a fairly consistent basis. Speculators who believe Trump can win the US election may believe this will create bearish sentiment for the USD/BRL, and those who believe Biden can be victorious may calculate that bullish momentum will get stronger within the forex pair. Until the election though, it appears cautious sentiment could rule the USD/BRL.
However, speculators know markets can become fast with a sudden spark and they should be ready for the USD/BRL to actually emerge from its recent tight range and possibly prove volatile as this week progresses. If fast conditions develop within the USD/BRL it may be a signal financial institutions are positioning themselves for an outcome in the US election they believe will happen.
Until the US vote is quantified the USD/BRL is difficult to gauge except to acknowledge the forex pair has shown a tendency to push up against resistance and then reverse slightly lower. Incrementally the USD/BRL has seen support levels rise and this may indicate more bullish momentum from the USD/BRL should be expected near term. Traders may want to pursue buying USD/BRL positions near the 5.5900 to 5.6100 marks and use low target support as stop loss orders near the 5.4900 juncture while looking for upside action.
Brazilian Real Short Term Outlook:
Current Resistance: 5.6540
Current Support: 5.5750
High Target: 5.6800
Low Target: 5.4900
