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This currency pair has experienced a rather tame trading range regarding price levels, but Tuesday’s close and yesterday’s gap upwards presents dynamics for speculators they might find appealing. The correlation to the broad Forex market remains in place for the USD/BRL, along with not only the cautious sentiment of Brazilian financial institutions as they brace for elections, but because of the murky outlooks still being interpreted regarding what the U.S Federal Reserve will do. USD/BRL traders still have an opportunity to trade an existing range that appears to be fair equilibrium.
Dollar Strength Meets Growing Caution Ahead of Brazil’s Election
Current conditions globally in Forex show that USD centric strength has taken a hold, this as risk appetite remains somewhat fragile. Investors worldwide are showing caution as they move money around. The USD/BRL has remained in a fairly steady range for a while and conditions may remain friendly for retail traders the remainder of this week, but as of the middle of next week not only will a cautious air saturate the currency pair, the reestablishment of positioning may start to come into force. National elections will be held in Brazil on the Sunday the 4th of October and the 25th. The outcome of this voting is certain to cause massive reactions in the USD/BRL, but a lot of the action will also take place before the final results are known. The well established range of the currency pair the past few weeks is an indication caution still holds, but this may begin to vanish in the coming days.
The 5.16 Area Becomes USDBRL’s Key Near-Term Test
The USD/BRL is near the 5.1646 mark as of yesterday’s close. The currency pair finished Tuesday’s trading near the 5.1010 ratio. The gap upon opening yesterday might have been part of a correlation to the broad Forex market, but it might also have something to do with Brazilian financial institutions getting a bit nervous about the month ahead and potential sentiment shifts.
Outlook for the USD/BRL has been solidly bearish in many respects over the long-term, but the past few weeks have certainly seen support levels become durable. However, before day traders run to place bets on upside momentum, they need to understand resistance has been quite strong too. Financial institutions are watching the Central Bank of Brazil, global inflation concerns and the effect on interest rates in the U.S, but they also want to know who will be leading the next Brazilian government. The trading realm has been relatively tight in the USD/BRL.
A Higher Opening Has Not Yet Changed the Wider Range
Yesterday’s opening and ability to remain within the higher ratios for the USD/BRL may be a warning sign that financial institutions are being cautious and expect some upwards momentum to develop. However, the move may have also only been a reaction to stronger USD centric price action which has developed the past handful of days. The price of WTI Crude Oil is an interesting comparison, this because the price of the commodity continues to show a cautious attitude.
Nervousness in global markets has not gone away, dynamic activity in Forex could burst forth. The tight range of the USD/BRL has been comfortable, but retail traders should watch today’s opening for telltale clues regarding sentiment. If the USD/BRL opens with another gap higher that would be interesting, particularly if new highs are sustained.
USD/BRL Price Chart
Market Caution Could Test Recent USDBRL Stability
While the upwards price action in the USD/BRL did prove capable of sustaining a high, technically the currency pair remains close to values seen only last week. The potential for another downturn in the USD/BRL is real. Financial institutions which have shown they are quite adept at remaining tranquil within the currency pair may prove their point once again today and tomorrow. The USD/BRL could easy traverse back to lower values and not many would be surprised. Day traders wanting to take advantage of momentum will need more than yesterday’s upwards velocity to prove it will become a sustained surge higher.
USD/BRL Traders Watch for a Return to Lower Levels
Today’s opening in the USD/BRL will prove a powerful sign. Early market conditions in Forex continue to show the USD is strong and this may cause some buying early in the USD/BRL. However, after the first half hour of trading has been completed, then retail traders should brace for the potential of intraday reversals and the potential to keep what has been a known range over the past few weeks intact.
USD/BRL Short Term Outlook:
USD/BRL is holding near the upper portion of its recent range after moving higher from Tuesday’s close. The 5.1690 area is the immediate upside level to watch; a sustained move above it could bring 5.1750 into focus. A move back below 5.1610 would place the recent higher opening under pressure and reopen the path towards 5.1220.
Immediate resistance: 5.1690
Immediate support: 5.1610
Upside level to watch: 5.1750
Downside level to watch: 5.1220
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