Lower again. The USD/BRL has continued its assault downwards as the Brazilian Real has shown remarkable strength and made the 5.0000 support level show that it is vulnerable. In the midst of anxiety regarding the Middle East conflict, the broad Forex market has demonstrated USD centric weakness as risk appetite appears to be gaining ground.
Financial institutions in Brazil and elsewhere dealing with the USD/BRL are showing absolute confidence in the Brazilian Real. The currency pair is now traversing ratios it has not explored since the middle of March 2024. In the first week of January 2024 the USD/BRL was near the 4.8500 value. Day traders who are technically inclined will have to pull out five year charts to get a view of the USD/BRL capabilities.
Correlation to Broad Forex Market
Before victory parades are launched in Brazil it should be noted the bearish trajectory of the USD/BRL is correlating to the broad Forex market. In other words, the downwards motion in the currency pair is not happening on its own. The Brazilian Real is strong and financial institutions are clearly showing confidence in the Brazilian Central Bank, but day trading will remain a test for intraday speculators.
Looking for downwards trajectory to continue may remain the central focus, but traders should not get overly ambitious. Clearly during yesterday’s trading session the 4.9700 level provided some pushback. Importantly, after opening with a gap lower on Monday the USD/BRL has shown the ability to sustain values consistently below the 5.0000 the past two days. There was a slight surge above 5.0000 on Monday, but it did not last very long.
Speculation and Risks for the USD/BRL
Day traders must remain realistic and acknowledge some risks remain in the global marketplace. If sudden developments in the Middle East escalate this could set off reversals higher in the USD/BRL, so stop losses must be a feature within tactical trading.
Looking for lower realms from the depths now being explored might feel correct, but at what point will financial institutions start to believe the Brazilian Real has gotten too strong?
Yesterday’s pushback around the 4.9700 level may prove of interest, and some day traders may view this mark as a legitimate target.
The opening of the USD/BRL as always carries danger and speculators not involved in the opening who want to join the party may want to wait for perceived resistance levels to be tested before pursuing lower ratios.
If global risk appetite remain strong today, the USD/BRL could traverse lower, but realistic goals must be used and take profit orders should be part of traders’ gameplans.
Brazilian Real Short Term Outlook:
Current Resistance: 4.9910
Current Support: 4.9790
High Target: 5.0030
Low Target: 4.9620