Resistance levels are being tested by the USD/BRL consistently as speculators attempt to trade within the forex pair’s tight range.
The USD/BRL continues to traverse within the higher boundaries of a rather consolidated range. Resistance levels are certainly being looked at by speculators as the Brazilian Real hovers near the 5.6000 juncture and trades within a narrow range. The USD/BRL has proven a consistently perplexing forex pair in the mid-term, because while many other emerging market currencies have done rather well against the USD, the Brazilian Real maintains a rather stable value range and has not shown a propensity for a bearish surge.
Yes, the USD/BRL has tested support below near the 5.3000 to 5.1000 range. However a predominant amount of that trading within those values was in late July until mid-September. Since the 17th of September the USD/BRL has produced a rather polite and dynamic bull run higher incrementally which has not yet shown any signs of faltering. During this climb a value of 5.6900 was tested in early October, but this produced a bit of a reversal.
However, the reversal downwards since the highs in early October have not been strong and the USD/BRL continues to demonstrate a rather calms trading range. Economically Brazil has generated a positive slew of reports which indicate the nation is handling the financial impact of coronavirus rather well compared to many of its neighbors. Criticized for not shuttering Brazil with closures as coronavirus escalated, the Brazilian government has been adamant regarding its staunch belief the economy needs to be kept open and this has created rather interesting data which suggests Brazil’s GDP has not been hurt as badly as some outside observers predicted.
However, the USD/BRL has not shown much ability to create downward momentum even as the USD has proven weaker against many other currencies in forex. The rather tight range of the USD/BRL suggests financial institutions are comfortable with it market value currently. Speculators therefore have an opportunity to engage in trades of the USD/BRL and experiment with its consolidation.
Global risk appetite is fragile as the US elections grow nearer and in the short term this may create some headwinds for speculators seeking to pursue downside price action via the USD/BRL. Resistance has also proven difficult to vanquish, meaning traders need to look at the USD/BRL with quick limit order trading tactics in mind. Buying the USD/BRL and looking for upside appears limited, but if risk appetite suffers more in the coming days globally it may prove interesting to speculate on bullish momentum developing which could test higher values.
Brazilian Real Short Term Outlook:
Current Resistance: 5.6340
Current Support: 5.5750
High Target: 5.6800
Low Target: 5.4900