USD/BRL has seen increased buying pressure since the New Year holidays, and values are now touching critical resistance levels since the start of the New Year.
The USD/BRL pair closed yesterday near 5.4800 and its gains have been fairly steady since reaching a low of almost 5.1300 on December 23rd. Bullish skeptics may be quick to point out that the aggressive rally took place over the festive season, and rightly so, but that can’t mask the idea that USD/BRL is being bought as financial houses may be worried. Upcoming changes in Brazil’s fiscal policy.
With full trading volumes picking up in the near term, USD/BRL is set to move lower now that the holiday season is winding down and financial houses are returning to their trading desks. The currency pair is almost passing through major resistance, and the 5.50,000 range can be seen as a key psychological barometer. Although USD/BRL briefly rose above this mark in November and July 2022, the Forex pair has not seen a sustained trade below 5.5000 since January 2022.
The short-term outlook will be important for sentiment on USD/BRL behavior
The next few days of trading in USD/BRL could help set the tone for the coming months. Crucially, the US Federal Reserve will release the minutes of its meeting today, which will serve as a key element regarding behavioral sentiment regarding interest rate policy next semester.
In addition, the change of power in Brazil is already official. The new president has been given an opportunity to promote changes in economic policy that are likely to be more liberal in terms of spending on social causes that his political party sees as justified. This will certainly raise concerns about the development of the value of the Brazilian real in the long term.
The return of the total trading volume will provide the traders with the predictions of the financial houses in the near future. The recent rally, which has been quite aggressive over the last ten days, should see a flourish of selling to create the idea that USD/BRL is overbought. If this does not happen and the higher price holds, it may raise doubts that USD/BRL is about to start a long-term uptrend. Traders should note that the USD/BRL open in the Forex market today is likely to be open.
USD/BRL Near term support and resistance to watch
- If USD/BRL suddenly approaches the 5.4900 to 5.4990 ratio at the open, it could mean that the 5.5000 target is clearly within the reach of speculative forces. A sustained move above 5.5000 would be a bullish sign.
- Support near the 5.4600 to 4.4500 area should be monitored. If they turn out to be easily vulnerable, it could mean that USD/BRL has been overbought over the past week and the currency pair could challenge the 5.4100 ratio in the near future.
Short-term prediction of Brazilian Real.
current resistance. 5.4990
current support. 5.4510
high goal. 5.5660
low target. 5.4020
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