USD/BRL Analysis 10/12: Shift In Growth (Chart)

(MENAFN- Daily Forex) The tranquil consolidated price realm of the USD/BRL has evaporated for the time being. Yesterday's close near the 5.4331 mark, after having traded around the 5.3000 mark last Thursday may look rather sedate. However, this has certainly not been the case for day traders, and probably not financial institutions either. Yesterday's jump towards the 5.4950 vicinity before reversing lower highlights the rather wide price realm of the USD/BRL, which for the past month and couple of weeks had been calm.

The culprit for the sudden dose of volatility was a GDP report delivered in Brazil that came in below its forecast. The result of 0.1% growth compared to the anticipated 0.2% number caused an immediate reaction in the USD/BRL. The Central Bank of Brazil is now believed to be in a position in which it will lower its interest rate in January, the current rate of 15% has been kept to battle stubborn inflation in Brazil. The current near-term price range for the USD/BRL appears to be in a reset mode.

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The lower growth rate in Brazil while likely not welcomed by Lula da Silva and his political party nevertheless is an outcome that might help fight inflation in Brazil. The lower GDP rate seems to have ignited the belief in financial institutions that a lower interest rate may be delivered. And a potentially lower interest rate from Brazil, coupled with a lower Federal Funds Rate in the U.S has seemingly halted the bearishness within the USD/BRL for the time being.

After battling around the 5.3000 ratio (with slight outliers lower) in September, October and November sporadically, the USD/BRL has traversed above 5.4000 mark consistently since last Friday in the wake of a buying spree. The higher push yesterday which came within sight of 5.5000 is a warning sign a shift of sentiment is being fought. The U.S Federal Reserve will lower its interest rate later today, unless there is a major surprise, by 25 basis points.

EURUSD Chart by TradingViewOutlook Changing and Nervous Sentiment

The nervous sentiment which has emerged in the USD/BRL the past three days of trading should be treated carefully by day traders.

• At some point, perhaps yesterday's, the currency pair will be considered too high under the current circumstances.
• However, the outlook the Federal Reserve sounds via its coming FOMC Statement will affect short and near-term conditions in the USD/BRL.
• If the Fed suggests additional cuts can be made in the mid-term, this will cause volatility in Forex including the USD/BRL.
• The next two days of trading in the USD/BRL should be treated carefully by speculators as larger players consider changes to their mid-term viewpoints.
• The last time the USD/BRL traded above the 5.5000 realm with consistency was in the first week of August 2025.

Brazilian Real Short Term Outlook:

Current Resistance: 5.4485

Current Support: 5.4175

High Target: 5.5090

Low Target: 5.3970

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