Sustained highs and a finish near the 5.1722 mark in the USD/BRL underscored existing nervousness in financial institutions regarding the currency pair, but the broad global Forex market as well.
After being able to traverse almost comfortably around the 5.0000 vicinity and sometimes below quite often in April and May, the USD/BRL has reacted to increased anxiousness. Financial institutions dealing with the USD/BRL are being confronted with a few important considerations which are causing for the moment a new approach to the currency pair.
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Early trading this week started with gaps upon openings and sustained higher ground. U.S equity indices which nosedived on Friday with selling, produced cautious buying on Monday and again saw frequent selling yesterday has certainly effected risk appetite. The USD/BRL closed yesterday’s trading near the 5.1722 ratio depending on bids and asks. Today’s opening for the currency pair will be greeted with additional volatility.
Waiting On Stage To Make A Presence: Inflation
U.S inflation data will be published in a few hours, nearly in conjunction with the opening of the USD/BRL, this will cause reactions in the broad Forex market too. If U.S CPI inflation readings come in higher than expected, financial institutions may start to fear the Federal Reserve’s pronouncements next week and could spur additional buying of the USD/BRL.
Another factor in nervousness being displayed in the USD/BRL is the renewed tariff threats from the U.S White House. While Brazil and China have made it known they intend on having a stronger financial partnership regarding trade the past few days (the relationship was strong already, yes), this may actually make financial institutions nervous about near and mid-term rhetoric that will come from President Trump. While that alone may not be enough to make folks buy the USD/BRL it is another ingredient in the Forex sauce.
Higher USD/BRL and Sustained Values
Speculators may be correct if they believe the USD/BRL has been overbought in recent trading. However, U.S stock markets remain nervous and they might continue to produce rather anxious moments for global investors which could spark additional risk averse sentiment.
If inflation is stronger in the U.S today, this is also another piece of a potential reactionary puzzle which may be demonstrated in the short-term.
Day traders wanting to sell on tests of resistance should be careful.
Because while yesterday’s highs didn’t challenge the peaks seen on Monday, nervous waves of buying could be seen again and if a trader has shallow pockets (not enough money in their account) they could be knocked out of trades seeking reversals which may not appear quick enough.
Today’s trading in the USD/BRL may produce rather tough conditions for retail speculators.
Brazilian Real Short Term Outlook:
Current Resistance: 5.1810
Current Support: 5.1690
High Target: 5.2250
Low Target: 5.1590
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