The Brazilian Real remains within an opportunistic trading range for nimble traders who have the ability for solid entry points and are capable of using take profits and stop losses. The rather consolidated range of the USD/BRL has tested lows of 5.0000 to highs of 5.2700 without much volatility. The tranquil trading may attract additional speculators who believe the Brazilian Real may soon experience a breakout.
However, breakouts do not necessarily help traders; in fact, they can often prove very dangerous particularly when you are on the wrong side of the price action. Because international equities appear rather choppy short term, traders may be tempted to look at resistance levels as a target with the belief forex pairs coupled with the US Dollar may be a good choice for see safe-haven positions. But the old adage, buy the rumor and sell the fact should be remembered, meaning that although global equity indices may appear fragile they may be ready to provide another leg up and follow a three-month trend.
The current range of the Brazilian Real offers traders a chance to swim on both sides of the speculative price. Short term traders more than anybody understand placing a trade and being able to withstand sudden gyrations is vital to good success. Well thought out entry levels for trades must be coordinated and a defined amount of money that is willing to be risked has to be decided upon before the trade starts. Trying to manage emotions while trades are in their midst is a formula for losing money. A trader must know exactly what their goals are and what pain (losses) they can withstand before a position is taken.
At its current price levels, a trader may be tempted to look at a buy of the USD/BRL if the forex pair touches the 5.1000 to 5.1500 level and hope for resistance to be tested near 15.2500 to 15.3000. On the other hand, speculative sellers could not be faulted for wanting to sell the USD/BRL if it continues to trade near the current resistance levels because they have the belief another reversal will develop.
A solid range of 5.000 to 5.28000 has emerged for the USD/BRL the past week and short term traders may be tempted to use it as a recipe the next two trading days if sentiment in the global markets remains stable. The Brazilian Real may be ready for a breakout, but being able to pick its direction could prove dangerous. If a trader wants to pick a direction mid-term, the 4.9000 to 5.3500 range looks to be where the battles for value will be fought.
Brazilian Real Short Term Outlook:
Current Resistance: 5.2500
Current Support: 5.1000
High Target: 5.3500
Low Target: 4.9000
