USD/BRL Analysis: Nervous but Holiday Trading Should Create Stability – 24 December 2024

The USD/BRL has had a whirlwind of trading action the past two weeks, but the holidays should deliver some relative calm for speculators over the near-term.

The USD/BRL closed trading yesterday near the 6.1940 mark and within sight of the 6.2000 level which has generated price action since last Tuesday. The U.S Federal Reserve rhetoric stating the central bank is going to take a more cautious approach to their interest rate policy created impetus the middle of last week, making the Brazilian Real weaker than it had already been. On Wednesday and Thursday of last week the USD/BRL challenged the 6.3000 level momentarily.

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While the ability to come off the record apex values is welcome, it doesn’t mean the USD/BRL is free of nervous sentiment. Concerns continue to be heard about fiscal policy via the Brazilian government’s social programs, and Lula da Silva’s battles against the Brazilian Central Bank remain unresolved. Incoming U.S President-elect Donald Trump does not make the outlook for the USD/BRL any easier.

Holiday Trading and Speculative Outlook

Trading in the USD/BRL will be extremely light the remainder of this week. Holiday volumes will be very thin and speculators who want to pursue the currency pair should be very careful. The ability of the USD/BRL to remain within sight of apex values is a warning sign that not all is well regarding behavioral sentiment of financial institutions as they consider their outlooks.

While it may be easy to say the USD/BRL has correlated to the broad Forex market the past few months because of stronger USD centric attitudes, this doesn’t allow for a ‘whitewashing’ of the nervous sentiment which has come from Brazil and made the Brazilian Real vulnerable. The combination of USD strength and BRL weakness has created upwards momentum for the currency pair that has made resistance levels porous. Speculatively speaking, trying to bet against the bullish trend which has been established the past ten months in the USD/BRL appears to be dangerous.

Wagering in the USD/BRL Near-Term

Betting on price action over the near-term in the USD/BRL should only be done by people who have complete faith in their brokers. Volumes will be extremely light and traders need to use entry price orders to make sure they are not getting killed on fills. Then speculators will need patience in very thin market conditions to wait for their trades to produce results.

-- Traders should also take into consideration that just because a price is seen on a trading monitor that this will not result in a ‘filled’ trade order, this because volumes are so thin a broker may rightfully say the price has to be traded through the target value in order to be conducted.
-- Traders who do want to conduct wagers in the coming days may find that volumes increase this coming Friday, but they should not take anything for granted.
Brazilian Real Short Term Outlook:

Current Resistance: 6.1990

Current Support: 6.1870

High Target: 6.2110

Low Target: 6.1780

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