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Climb Higher and Price Velocity Creating Intrigue


After the strong upward movement upon opening this Monday, the USD/BRL continued to move higher with a rather dynamic pace. 

The USD/BRL has produced rather large gaps upon opening the past handful of days and it would not be surprising to see another intriguing start to the day for the currency pair. The USD/BRL closed around the 5.1668 mark yesterday, which is a high not seen in late March of this year. Just two weeks ago the USD/BRL was trading near the 4.8400 vicinity and traders who had gotten accustomed to the lower price realms of the currency pair may feel somewhat baffled by the rather quick climb higher which has been produced the past week.

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While economic conditions in Brazil continue to highlight solid growth, the global markets have turned nervous, and risk-averse conditions have caused the USD to get stronger. The USD/BRL is acting in a correlated manner with the broad Forex markets. The price velocity upwards in the USD/BRL has been fast the past couple of days and this has taken place because the 5.0000 level was sustained on Monday and nervous market conditions have combined to create buying action.

After the strong upward movement upon opening this Monday, the USD/BRL continued to move higher with a rather dynamic pace. The 5.1000 ratio was broken yesterday and upon the level proving vulnerable, the USD/BRL produced another strong dose of buying. The question now becomes where the USD/BRL will start to run into resistance. U.S. economic data via jobs numbers are coming this Friday and this will certainly factor into USD/BRL trading and likely cause more volatility near-term.

  • The opening of the USD/BRL should be watched closely today since the currency pair closed at a high while finishing yesterday.
  • A gap higher today would likely signal additional nervous sentiment that still believes the USD/BRL may have more room to roam upwards, but choppy conditions may start to be demonstrated as financial houses anticipate Friday’s Non-Farm Employment Change numbers and Average Hourly Earnings data from the States.

Traders of the USD/BRL should be ready for a considerable amount of nervous trading short and near-term as financial institutions try to position before the U.S data. Also, speculators need to keep in mind U.S Treasuries are drawing a lot of attention and U.S equities are trading at mid-term lows. This has created an extra dose of nervousness within Forex which has made the USD stronger across the board.

The U.S. Federal Reserve is expected to raise its interest rate in November too. Only very lackluster economic data from the U.S. starting this Friday and into the next couple of weeks could change the Federal Reserve’s outlook. Traders who want to bet against the rapid climb of the USD/BRL in the short-term should be extremely cautious, because nervousness may actually increase over the next couple of days.

Current Resistance:  5.1740

Current Support:  5.1490

High Target: 5.2130

Low Target:  5.1085


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