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Return to Bearish Trend and Speculative Reactions


The USD/BRL may face speculative reactions after showing the ability to maintain a bearish trend, even in the wake of stronger-than-expected U.S. inflation.

The USD/BRL finished yesterday’s trading near the 5.1675 mark.  The USD/BRL has been able to produce a rather solid range the past two trading days which has brought the currency pair to within sight of it lower values seen last Tuesday. After the stronger than expected inflation data from two U.S reports on Tuesday and Thursday of last week, and seeing a high of nearly 5.2590 accomplished on the 16th of February, the USD/BRL fell to a value slightly below the 5.1500 mark on Friday.


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U.S financial houses were closed yesterday for a holiday and the return of U.S investment institutions may cause choppiness in the USD/BRL this morning.  Traders of the USD/BRL should be braced for a gap upon the start of trading today and its early direction should be monitored.  Yesterday’s trading was fairly consolidated and a slight reversal higher was seen as the USD/BRL briefly traded over the 51.1700 juncture.

Before U.S Inflation Data Last Week the USD/BRL touched the 5.1300 area

The move lower by the USD/BRL after the U.S inflation data reports, which confirmed the Federal Reserve’s rather hawkish rhetoric in early February is noteworthy.  The ability to move slightly lower and come within sight of lows seen last Tuesday is intriguing, but the lower support values has not been proven vulnerable and this remain difficult in the near-term.

  • USD/BRL should expect choppy conditions and support levels to prove rather durable in the near-term; the return of full U.S investment house trading volumes could cause early volatility too.
  • Preliminary GDP numbers will come from the U.S this Thursday and short-term traders should acknowledge this may cause some cautious price action in the USD/BRL until the outcome is known.

USD/BRL Ability to Remain near Lows may Attract Speculators

Speculators who feel the USD/BRL has been oversold in the short-term because they believe more interest rates hikes will come from the U.S over the mid-term cannot be faulted.  However, the USD/BRL has certainly priced a March rate hike from the U.S Fed into the currency pair’s value already.

If stronger than anticipated Preliminary Gross Domestic Product numbers are demonstrated this coming Thursday this will cause more buying of the USD/BRL in all likelihood. Until the GDP numbers are produced a narrow range is likely to be exhibited in the USD/BRL, but nevertheless traders should use cautious risk management to protect against sudden volatility.

Brazilian Real Short Term Outlook:

Current Resistance:  5.1720

Current Support:  5.1560

High Target: 5.2210

Low Target:  5.1370



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